2020 left so many of us whirling with adapting to operating our business in a pandemic. Now the tax filings are coming due and many of them have changes related to how Canada Revenue Agency has adapted its expectations for the employee and employer. Staff may have been required to work from home, they may have been laid off and collected CERB, or you may have qualified for COVID-19 subsidy initiatives. Below are some highlights of how these may affect you and your staff this T4 and corporate and personal tax season.
If your staff worked from home, consider the following:
- If your staff worked from home greater than 50% of the time for 4 consecutive weeks at any point in 2020, they can claim a home office on their personal tax return. You, as the employer, can encourage they use the simplified T777S that you do not have to sign off on for them. This allows them to claim a flat rate $2 per day up to $400. If they find it more beneficial to complete the detailed calculation using actual costs in their home, you must sign the T2200S for them. If they claim more than a home office as an employment expense, such as automobile, then you must complete the regular T2200 for them.
Visit the CRA website for further details:
- If you paid an employee in 2020 for costs incurred to work from home due to COVID-19 with a flat payment over $500, it is a taxable benefit on their T4. As long as the amount was not greater than $500, it is not taxable.
- If you normally calculate a standby charge on an employer provided vehicle to include as a taxable benefit on T4s, you can use the 2019 kms instead of 2020 if COVID-19 kept them at home. This is only allowed if they worked for you and were provided an automobile in 2019 also. Note, if you required the employee to take their vehicle home at night due to COVID-19, normally this would be considered personal milage, but this will be waived in 2020.
- If you applied for the Temporary Wage Subsidy, you must file a PD27 before completing your T4s. If you have already filed your T4s, please forward this form now before they request it.
- T4s for employment earnings were required to separate the gross salary into periods paid throughout the year rather than as a lump sum total as usual. If your staff collected CERB in a period you identify as paying a salary to them, there is potential they will be required to repay the CERB.
- If you received the Canada Emergency Wage Subsidy, Canada Emergency Rent Subsidy, or the Saskatchewan Small Business Emergency Subsidy, these are taxable and must be reported as income to you in 2020. You are required to accrue them in the period they relate to, not when you complete the application and receive the funding. Therefore, before completing your tax return for the business you will need to calculate the amount you anticipate receiving and record it as an accounts receivable. If you have already filed your tax return you will need to amend it once the amount is known.
Please ensure you have applied for all government funding available to you for COVID-19 recovery. Here is a review of some programs available and a link to more information on them:
1. Canada Emergency Wage Subsidy (CEWS)
This is based on ANY drop in gross revenue. The periods covered in March to July were due January 31, 2021. Each application going forward is due 180 days after the cut-off date of the period. August applications will be due before February 25th.
2. Canada Emergency Rent Subsidy (CERS)
This one is misleading as it is a subsidy for you as a renter of the space you operate from but also for businesses who own their own building. It uses a similar approach as CEWS for calculating if you qualify based on your revenue drop. This program started September 27, 2020 and applications are also due 180 days after the period cut-off.
3. Saskatchewan Small Business Emergency Subsidy
This provides a payment to small and medium-sized businesses directly affected by provincial public health orders related to COVID-19. Payments for December 2020 and January 2021 are issued based on 15 per cent of a business’s monthly sales revenue, to a maximum of $5,000. The program is open for applications and the deadline to apply for the December and January payments is March 2, 2021. Applicants for the December payment are not required to re-apply for the January payment.
4. Canada Emergency Business Account (CEBA)
This is a loan available for qualifying businesses effected by COVID-19. Applications are made through your bank and are due March 31, 2021. There is the potential for a portion of this to be forgiven.
Contact Nadine today to discuss your personal circumstances.