Categories
covid19

COVID-19 Financial Benefits to Individuals and Businesses

The Federal Government had announced several programs to assist individuals, business and industries that are facing hardship as a result of the COVID-19 outbreak. Although the details are still being finalized, most programs are already on the way. Below is a summary overview of current federal cash benefits available to individuals and businesses under the various programs and their interplay with one another.

  • CERB (Canada Emergency Response Benefit): $500/week
  • Canada Emergency Wage Subsidy (CEWS): 75% of salary, up to $847/week
  • Temporary Wage Subsidy (TWS): 10% of salary
  • Work-Sharing (WS) Program
  • Canada Emergency Business Account (CEBA): $40,000 loans

CERB (Canada Emergency Response Benefit)

Individuals who have stopped working due to COVID-19 may apply and be eligible to receive temporary income support of $500 per week for up to 16 weeks.

Eligibility:

  • Age 15 and older;
  • Employees or self-employed who ceased to work due to COVID-19, but not quitting their jobs or eligible for EI;
  • Income of at least $5,000 in 2019 or 12 months before application; and
  • Those who are and expect to be without employment or self-employment for at least 14 consecutive days in the initial four-week period. For subsequent benefit periods, they expect to have no employment or self-employment income.

Application Process:

Canada Emergency Wage Subsidy (CEWS) 75%

The CEWS provides employers up to 75% of an employee’s salary for up to 12 weeks. This benefit is calculated based on the greater of: (1) 75% of the actual remuneration paid to the employee by the employer since March 15, 2020 up to the maximum benefit of $847/week per employee; and (2) the lesser of the actual remuneration paid (up to $847/week) or 75% of the employee’s pre-crisis weekly remuneration.

Payroll Contributions: 100% of certain employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan and the Quebec Parental Insurance Plan will be refunded.

Eligibility:

  • Self-employed individuals, partnerships, taxable corporations, non-profit organizations and registered charities.
  • Employers must be able to demonstrate a drop of at least 15% in revenue (from arm’s-length sources), excluding extraordinary items and amounts on account of capital for the March 15 to April 11, 2020 claim period, and a drop of 30% in revenue for subsequent eligible claim periods.
  • The revenue decrease may be determined on an accrual basis or cash basis. The basis chosen must be consistent throughout the claim periods.
  • The employer is expected, where possible, to maintain the employee’s pre-crisis salary level.

Application Process:

Temporary Wage Subsidy (TWS) 10%

The TWS provides employers up to 10% of an employee’s salary for remuneration paid from March 18, 2020 to June 19, 2020. The maximum amount eligible is up to $1,375 for each eligible employee up to a maximum of $25,000 total per employer; Associated Canadian Controlled Private Corporations (CCPCs) will not be required to share the $25,000 maximum per employer.

Eligibility:

  • Individuals, partnerships, CCPCs eligible for the small business deduction, non-profit organizations and registered charities.

Application:

Work-Sharing (WS) Program

This program provides EI benefits to eligible employees in a “Work Sharing Unit” who agree to reduce their normal working hours by at least 10% to 60%. Normally the maximum period for WS arrangements is 38 weeks, but it has been extended to 76 weeks for businesses affected by COVID-19.

Eligible employers:

  • Year-round business at least one year old;
  • Private business or publicly held company and not-for-profit employers; or
  • Have at least 2 employees in the WS unit.

Eligible employees:

  • Year-round employees (core staff) but do not hold more than 40% of the shares in the business;
  • Eligible for EI Benefits; and
  • The employees agree to the reduction of normal working hours.

Application:

Canada Emergency Business Account (CEBA)

This program is offered through commercial banks, not government agencies. The offer provides a $40,000 interest-free government-guaranteed loan, of which $10,000 will be forgiven if you have paid back $30,000 on or before December 31, 2022. 

Federal government also offers, through BDC and EDC, the Business Credit Availability (BCAP) that can provide operating credit and cash flow term loans of up to $6.25 million to (SMEs) Small and Medium Enterprises.

Eligibility:

  • Businesses that have payroll between $50,000 to $1,000,000 in 2019.

Application:

  • Contact your principal bank for details of CEBA or BCAP.

Interplay Within the Programs

  • Those receiving EI benefits currently cannot obtain benefits through CERB;
  • Those eligible for the CEWS and TWS can take advantage of the TWS now. Once the CEWS is available, any benefit received under TWS will reduce the benefit to receive under the CEWS;
  • Where an employer is eligible for the CEWS and TWS, any benefit from the TWS for remuneration paid in a specific period would reduce the amount available under the CEWS in the same period;
  • Where employers and employees are participating in the WS program, EI benefits received by employees through the WS program will reduce the benefit the employer is entitled to receive under the CEWS;
  • Employers are encouraged to rehire employees as quickly as possible and to apply for the CEWS if they are eligible. The government will be considering implementing measures to limit duplication of benefits under the CEWS and CERB programs.

Categories
tax

Income-Splitting Strategies

Are you looking for tax saving opportunities while filing your tax return? Forward-looking planning with a year ahead can help you find different tax-saving strategies and techniques available to you. Income-splitting techniques may be available to you if you plan ahead and your situation fits.

If you and your family member(s) have different income levels and the marginal income tax brackets are quite different, you may be able to reduce your family’s overall tax burden by taking advantage of the differences. Try to use one or a combination of the following strategies.

Income-splitting loans

You can loan funds to a family member at the prescribed interest rate specified by CRA (the current annual rate is 2%). Your family member can invest the money and the investment income will not be attributed to you (i.e., treated as your income for tax purposes), as long as the interest for each calendar year is paid no later than January 30 of the following year.

The CRA announces the prescribed interest rate on a quarterly basis, based on a three-month average of short-term government of Canada T-bill rates and rounded up to the highest whole percentage number. The current rate can be found on the CRA’s website: https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates.html

Spousal RRSPs

A registered retirement savings plan (RRSP) is a registered account to which you or your spouse or common-law partner could contribute. Deductible RRSP contributions can be used to reduce your tax. In addition to splitting income in retirement years, spousal RRSPs may be used to split income before retirement. The higher-income spouse or partner can get the benefit of making contributions to a spousal plan at a high tax rate and, after a three-year noncontribution period, the lower- or no-income spouse can withdraw funds and pay little or no tax.

Reasonable salaries to family members

If you own a business, consider employing your spouse or partner and/or your children to take advantage of income-splitting opportunities. Their salaries must be reasonable for the work they perform.

This planning is becoming more important than in the past because other income splitting opportunities involving your business (such as paying dividends) may be limited by the recent changes in tax laws.

Recent amendments may limit income splitting opportunities with certain adult family members through the use of private corporations in 2018 and later years. For example, a business is operated through a private corporation, and an adult family member in a low-income tax bracket subscribes for shares in the corporation. A portion of the business’s earnings is distributed to the family member by paying dividends.

These rules apply the highest marginal personal income tax rate (the tax on split income) to the dividend income received unless the family member meets one of the legislated exceptions to the application of this tax. For example, if the adult family member is actively engaged in the business on a regular basis by working an average of at least 20 hours per week during the year (or in any five previous but not necessarily consecutive years), the tax on split income may not apply.

Categories
tax

Income Tax Checklist

Tax season is coming. Generally, the personal income tax filing deadline is April 30. Income tax filing can be overwhelming. To make sure you get every tax credit and deduction you are entitled to, use the following checklist to get ready with all the receipts and income records necessary.

Tax slips 

  • T4 slips (Employment income)
  • Employment insurance benefits (T4E)
  • Interest, dividends, mutual funds (T3, T5, T5008)
  • Tuition / education receipts (T2202A)
  • Universal Child Care Benefit (RC62)
  • Old Age Security and CPP benefits (T4A-OAS, T4AP)
  • Other pensions and annuities (T4A)
  • Social assistance payments (T5007)
  • Workers’ compensation benefits (T5007)
  • All other information slips

Receipts

  • RRSP contribution receipts
  • Support for a child, spouse or common-law partner
  • Professional or union dues
  • Tool expenses (Tradespersons & apprentice mechanics)
  • Medical expenses
  • Transit pass receipts
  • Charitable donations
  • Political contributions
  • Child care expenses
  • Adoption expenses
  • Children’s arts and sports programs
  • Moving expenses
  • Interest paid on student loans
  • Carrying charges and interest expenses
  • Office – in-home expenses
  • Exams for professional certification

Other supporting documentation

  • Notice of Assessment/Reassessment from CRA
  • Canada Revenue Agency correspondence
  • Sale or deemed sale of stocks, bonds or real estate
  • Northern residents deductions receipts
  • Rental income and expense receipts
  • Business, farm or fishing income/expenses
  • Automobile / Travel logbook and expenses
  • Disability Tax Credit Certificate
  • Declaration of Conditions of Employment (T2200)
  • Volunteer Firefighters certification
  • Search and Rescue volunteers certification
  • Custody Arrangement documentation
Categories
Uncategorized

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