- Canadians who are self-employed without a paid sick leave program may be eligible for the Canada Recovery Sickness Benefit (CRSB). This benefit is available from September 27, 2020, to September 25, 2021. The deadline for applying for any one-week period is 60 days after the end of that period. Similar to the CRB, the amount is subject to a 10% withholding tax which may be insufficient to cover the tax liability.
- Working from Home has been commonplace for many employees who used to have an office to go to. There are many specific rules related to deducting “home office” expenses and generally, most employees do not qualify to claim this deduction, however, on November 30, 2020, CRA has stated that individuals can claim up to $400 in-home expenses on their 2020 tax returns. The CRA will not require employees to track expenses or provide documentation from employers stating that the employee was required to work from home. The traditional detailed method of claiming home office expenses and the requirement for T2200 form provided by the employer is still required for those wanting to claim more than $400.
- Under the Canada Emergency Wage Subsidy (CEWS) program, business owners should keep in mind that the CEWS payments are taxable income to the employer and are deemed to be received on the last day of the applicable CEWS period. Due to this deeming provision, the amounts may be taxable before they are even received from CRA.
- Under the Temporary Wage Subsidy (TWS) program, a business eligible for TWS that did not reduce payroll remittances can still apply and the CRA will pay the amount of the subsidy to the business owner or transfer it to the following year’s remittance. Like the CEWS, the TWS is taxable to the employer in the year received. Form PD27 needs to be filed to report TWS amounts.
- During the pandemic, many employees with company cars have not been able to travel for business due to COVID-19. These employees may now have a higher proportion of personal use, resulting in a higher taxable benefit. CRA indicates that relief is not currently being contemplated in this situation and that employers should compute the standby charge as legislated. As the employer, it may be a good idea to give the employee a “heads-up” about this change.
- Travel from home to worksite: CRA addressed whether travel from home to a work site (or “point of call”) during the pandemic would be considered business travel. CRA confirmed that it would indeed be considered business travel, provided that the route taken is reasonable, and that the worksite is not a regular place of employment.
- Asset sale strategies: Examining the tax implications of asset sale strategies will result in organizations more carefully managing their tax position. This may include writing down obsolete inventory and investments and the crystallization of unrealized tax positions and undertaking a more detailed analysis of year-end provisions/accruals. In-house loss utilization plans and loss refreshing techniques can help an organization improve its cash flow.
- Optimize tax incentives and credits: Organizations should consider what government support they are eligible for in turbulent times. Government-funded collaboration also could be of benefit in terms of speed to market and financial savings. Businesses should also understand and leverage special tax exemptions and deductions provided by governments during a time of crisis that can potentially improve their cash position.
- Adopt tax-related cash management strategies: A tax management focus should be a part of a business’s overall cash management strategy. This can help to offset falling profits and shrinking margins. Areas to consider include non-cash employee benefits, bad debt write-offs, goods and services tax or harmonized sales tax (GST/HST), trade and customs tariffs, prompt filing of tax returns to bring forward tax refunds and early crystallization of reductions. Businesses should review the tax efficiency of operations, making use of any opportunities to defer or reduce payment of tax, and look for refunds. Businesses should also consider the customs duty impact if alternate suppliers need to be used.
- New T4 Reporting requirements. With the various government programs in place this year, the CRA has introduced new reporting requirements for employers with employees. When preparing and submitting T4s for employees in 2020 4 new codes must be included:
- Code 57 – March 15 – May 9
- Code 58 – May 10 – July 4
- Code 59 – July 5 – August 29
- Code 60 – August 30 – September 26
Employers are required to report income and any retroactive payments made during these periods.
- Canada Emergency Rent Subsidy (CERS): The CERS program was created to replace the Canada Emergency Commercial Rent Assistance (CECRA) program but takes the landlord out of the equation allowing the tenant to apply directly. The program runs from September 27, 2020 – June 2021 and is based largely on the CEWS criteria. Additional provisions are made for businesses subject to lockdowns by provincial health orders.
- CEBA 2.0 – The original CEBA program provided a $40,000 interest-free loan to applicants. On December 4, 2020, the program was increased to $60,000. Applications are open until March 31, 2021. The additional $20,000 is non-interest bearing until December 31, 2022, and up to $10,000 will be forgiven if the full balance is repaid by that date.