As the holiday season begins, we would like to take this opportunity to say THANK YOU to all of our clients. 2020 has been an interesting year and has presented us all with some serious unexpected challenges and we want to let our clients know that we are here to help you navigate these uncharted waters.
In prior years our Christmas letter has focused on personal tax considerations for the upcoming tax year, and news from the most recent federal budget. This year, however, with COVID-19 pushing the release of a federal budget aside and introducing many new tax and benefit initiatives to help taxpayers manage the financial strain brought on by the virus, we wanted to focus on providing a roadmap to the various COVID-19 benefits available and other changes to accounting and tax in the midst of the pandemic.
COVID-19 Benefits for Individuals
Since the onset of the COVID-19 pandemic in early 2020, the government has been rapid in its response to calls for individual support for those financially impacted by the economic effects of the virus. Numerous benefit programs have been introduced mostly focusing on individuals who have experienced a loss of employment or reduction of work, and billions of dollars of support funding have been distributed to date. Here is a brief summary of a few of the most important benefits available to individuals.
Canada Emergency Response Benefit (CERB)
This is a benefit of $500 per week available from March 15 to September 26, 2020. Eligible individuals can still apply for CERB on a retro-active basis.
The benefit is available to workers over the age of 15 and residing in Canada:
- Who have stopped working because of reasons related to COVID-19 or are eligible for Employment Insurance regular or sickness benefits or have exhausted their Employment Insurance regular or fishing benefits between December 29, 2019 and October 3, 2020;
- Who had employment and/or self-employment income of at least $5,000 in 2019 or in the 12 months prior to the date of their application; and,
- Who have not quit their job voluntarily.
Transition to Employment Insurance (EI) Benefits
As of September 26th, the federal government has ended the eligibility period for the CERB program to focus on an overhauled EI program for those still experiencing reduced work.
Temporary changes to the EI program effective September 27, 2020 include:
- Reduction of required insurable hours in the 52 weeks prior to their EI application from 420 under the normal rules to 120.
- Increase the minimum weekly EI benefit from 55% of average weekly earnings to $500 per week or $300 per week for extended parental benefits.
- Increase the minimum number of weeks for EI eligibility from 14 to 26.
Canada Recovery Benefit (CRB)
Benefit of $500 per week for up to 26 weeks for workers who are directly affected by COVID-19, but who otherwise do not qualify for regular EI benefits.
- Eligible individuals can receive a benefit of up to $1,000 for each two-week period and must re-apply every two weeks for a continuation of benefits.
- Can apply for up to 13 two-week eligibility periods between September 27, 2020 and September 25, 2021.
- Individuals who earn more than $38,000 in net income on their income tax return must repay $0.50 for every dollar earned in excess of $38,000 (up to the total CRB benefit received).
Canada Recovery Sickness Benefit (CRSB)
Benefit of $500 per week ($450 after 10% taxes withheld) for up to two weeks for workers who have stopped working due to COVID-19 or whose income has dropped by at least 50%, but who otherwise do not qualify for regular EI benefits.
Canada Recovery Caregiving Benefit (CRCB)
Benefit of $500 per week, per household for up to 26 weeks for individuals who have been unable to work for at least 60% of their normally scheduled work within a given week due to a need to care for a child under the age of 12 or family member with a disability (generally must be due to a closure of school, daycare, or other care facility due to COVID-19).
For more information on these individual recovery benefits visit our detailed Guide to the Canada Emergency Response Benefit (CERB) the Canada Recovery Benefit (CRB) and Other Individual Relief Benefits blog.
COVID-19 Benefits for Businesses
In addition to the various support available for individuals, there are also several COVID-19 subsidy and benefit programs available to business and employers. Some of the most significant programs available are as follows.
Canada Emergency Wage Subsidy (CEWS)
Since the CEWS program was announced in March 2020, the CRA has processed over 1.6 million claims with over $49 Billion in total subsidies paid. The program was originally scheduled to run from March 15 until July 4, 2020, however, on July 27th an extension to November 21, 2020 was passed, and a further extension until June 2021 was announced on October 9th.
The subsidy provides funding to employers to cover a significant portion eligible wages paid during each of the program’s 10 four-week periods to date (up to December 19, 2020). Depending on the period and other relevant factors, a subsidy of as high 100% of wages paid in respect of the period can be available, with a maximum subsidy of 65% applicable in the most recent periods 8 through 10.
To be eligible for a subsidy claim in each period, qualifying entities must also be able to support that they experienced a decline in revenues for the relevant period. Although the initial four periods required entities to show a revenue decline of at least 30% (only 15% for Period 1), the rules for claim periods 5 and subsequent were revised to allow for a subsidy to be claimed where the entity can support a revenue decline of greater than 0%.
The deadline for filing the CEWS application for each period is the later of January 31, 2021 and 180 days after the end of the respective claim period.
The rules for the Canada Emergency Wage Subsidy are notoriously very complicated, so if you are considering applying, please visit our detailed Guide to The Canada Emergency Wage Subsidy (CEWS) for Employers blog, and contact our office for answers to any questions you may have or assistance you may require in submitting your applications.
Canada Emergency Rent Subsidy (CERS)
This program is intended to provide continued support to business to cover their commercial rental costs for the period of September 27 to June 2021 (exact end date is not yet known). In addition to commercial rental costs, the CERS subsidy also provides support to commercial property owners to cover similar costs of ownership, including property taxes, insurance, and commercial mortgage interest.
Similar to with the CEWS program, eligible entities must demonstrate a reduction of revenues from pre-COVID levels in order to determine the percentage of the total subsidy available.
A maximum subsidy percentage of 65% is available, with a possible 25% additional-top up subsidy available for businesses that were required to close or cease certain activities at one or more of their locations under a public health order for one week or longer. The maximum subsidy is also capped at a total of $75,000 in eligible expenses per business location and $300,000 per business (shared among affiliated businesses).
All CERS applications must be filed no later than 180 days after the end of the respective claim period.
If you are considering applying for the CERS subsidy for your business, visit our detailed Guide to the Canada Emergency Rent Subsidy (CERS) blog for a detailed summary of the CERS rules and eligibility criteria, and contact our office for answers to any questions you may have or assistance you may require in submitting your applications.
Canada Emergency Business Account (CEBA)
This is a one-time interest-free loan of $40,000 made available to eligible businesses, with $10,000 of the loan forgivable if repaid on or before December 31, 2022.
As of December 4, 2020, an expansion to the CEBA program was made available allowing applicants to request an additional $20,000 loan, with an additional $10,000 to be forgiven if repaid by December 31, 2022 (total of $60,000 with $20,000 forgivable).
In order to be eligible for the CEBA loan, businesses must have had either:
- $20,000 or more in eligible employment income paid (wages paid to employees) for 2019; or,
- $40,000 or more in eligible non-deferrable expenses for 2020.
All applicants have until March 31, 2021, to apply for $60,000 CEBA loan or the $20,000 expansion.
For more information on the CEBA loan and how to apply visit our detailed Guide to the Canada Emergency Business Account (CEBA) Loan for Businesses blog.
CRA Interactive Tool for Financial Assistance for Businesses
With so many different COVID-19 support benefits made available for small businesses this year, some businesses may be finding it difficult to keep track of the assistance available to them. The federal government, through Innovation Canada, recently released an interactive tool which businesses can use to identify the specific grant and support programs that they may be eligible for.
The tool can be used to identify COVID-19 specific support programs as well as other general government support available, and can be found at the Innovation Canada webpage.
There are many different COVID-19 programs available from both the federal and provincial levels of government. For more information on these programs, you can also check out our main blog page for our various blogs published to date and updates as they become available.
Home Office Expenses in the World of COVID-19
In light of the impact of the pandemic on the current work environment it will be important for taxpayers working from home to be aware of what home-office expenses are available to be deducted and what support is required in order to claim any deductions that may apply.
For employees, generally you can deduct home office expenses paid for the employment use of a work space in your home, as long as you meet one of the following conditions:
- The work space is where you mainly (more than 50% of the time) do your work; or,
- You use the workspace only to earn your employment income. You also have to use it on a regular and continuous basis for meeting clients, customers, or other people in the course of your employment duties.
To deduct these expenses, employees will be required to keep all supporting receipts as well as a copy of Form T2200, Declaration of Conditions of Employment, which has been completed and signed by your employer.
You can deduct the part of your costs that relates to your work space, such as the cost of electricity, heating, maintenance, property taxes, and home insurance. However, you cannot deduct mortgage interest or capital cost allowance.
For more information on the deductibility of home office expenses for employees visit the CRA page for Work-space-in-the-home expenses.
As part of its Fall Economic Statement released on November 30, 2020, the federal government also announced additional access to home office expense claims for employees. The new temporary flat rate method simplifies your claim for home office expenses. You are eligible to use this new method if you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020 due to the COVID-19 pandemic. You can claim $2 for each day you worked from home during that period plus any additional days you worked at home in 2020 due to the COVID-19 pandemic. The maximum you can claim using the new temporary flat rate method is $400 (200 working days) per individual.
The CRA has also recently commented that it would allow employers to provide employees with a one-time non-taxable reimbursement of up to $500 per employee for the purchase of personal computer or office equipment (including office furniture). The payment will be considered a deductible expense to the employer and employees receiving this benefit should be encouraged to retain receipts for the purchase of supplies to support the non-taxable nature of this benefit.
Meal Rate Change for 2020
Effective January 1, 2020, the CRA has increased the flat rate amount for meal allowance claims from $17 to $23 per meal. This is the amount that employers can use to determine whether an overtime meal or allowance is taxable and the rate at which transport employees and other individuals can claim meal expenses. For more information on this rate increase visit the CRA news release from September 3, 2020.
Vehicle Mileage Tracker App’s
For any business owner claiming a mileage expense for the business use of a personal vehicle the most important documentation to retain in support of the expense claimed is a logbook with details of business trips made during the year. There are a number of useful apps available for download that can be used to assist with vehicle mileage tracking, including in some cases, the automatic tracking of distance travelled. Below are some of the smartphone applications and other tools available:
- MileIQ - https://www.mileiq.com/
- Driversnote - https://www.driversnote.com/
- Milebug - https://milebugblog.blogspot.com/p/home.html
- Odotrack – https://odotrack.com/en/
Year-End Tax Planning Tips
December 31, 2020 is fast approaching…check out our latest blog for important year-end tax planning tips for individuals and corporation owner/managers.
Tax-Free Savings Accounts (TFSA) Contribution Room
Your TFSA contribution room is the maximum amount that you can contribute to your Tax-Free Savings Account.
You may contribute to a TFSA if you are 18 years of age or older, have a valid Canadian social insurance number and are a resident of Canada. The TFSA contribution room accumulates every year starting in 2009. The investment income earned within a TFSA and changes in the value of the TFSA investment will not affect your TFSA contribution room for current or future years.
TFSA eligible investments are not limited to standard savings accounts. Generally, the types of investments that are permitted in a TFSA are the same as those permitted in a registered retirement savings plan (RRSP). These would include:
- cash
- mutual funds
- securities listed on a designated stock exchange
- guaranteed investment certificates
- bonds
- certain shares of small business corporations
The 2021 annual TFSA contribution limit will be set at $6,000 which has remained consistent since the annual limit was last increased in 2019.
If you are unsure about how much you can contribute to your TFSA you can confirm your remaining TFSA contribution room for the year by following the steps below:
- Log into your CRA My Account online or contact the CRA by phone at 1-800-959-8281 where you can request your TFSA contribution room as at January 1 of the current year.
- Subtract any contributions made during the year to date as the TFSA balance available from CRA will not yet consider the contributions made for the year. You may need to contact your financial institutions for the details of any contributions made to date.
It is important to keep in mind that withdrawals cannot be recontributed during the same year without counting against your available TFSA contribution room. This is because the amount of any withdrawal from your TFSA account is not added back to your contribution limit until the following year, whereas the amount of any re-contributions is counted against your TFSA contribution room for the year in which the recontributions is made.
New Trust Reporting Requirements for 2021
As part of the 2018 federal budget the government proposed important new trust reporting requirements beginning for trust taxation years ending on or after December 31, 2021.
Prior to the onset of these rules, many trusts were not required to file annual T3 trust tax returns if certain conditions were met such as no taxable income to report for the year or no distributions made to beneficiaries during the year. For many of these trusts the new reporting rules will create a requirement to file for 2021 and subsequent years, as well as a requirement to disclose specific personal information about persons involved with the trust.
The new trust rules will require most trusts to file a T3 return annually to report personal information for any person involved with the trust that falls into one of the following categories:
- Settlors;
- Trustees;
- Beneficiaries;
- Other persons with the ability to exert control over the trust (could include a protector of the trust or a director/shareholder of a corporate beneficiary).
The specific personal information that must be disclosed for each person includes their name, address, tax residency, and Social Insurance Number.
Failing to report this information can result in a penalty equal to $25 per return for each day that the information is outstanding up to a maximum penalty of $2,500. More significantly, in cases of gross-negligence a penalty can be applied equal to the greater of $2,500 and 5% of the fair market value of the assets held by the trust.
Although certain types of trusts are excluded from the rules, most personal trusts and testamentary trusts (other than a Graduated Rate Estate) will not be exempt from these new reporting requirements. It will be important to contact your tax advisor if you are involved with a trust and unsure whether these new reporting rules may apply.
Protect yourself against fraud
The Canadian Anti-Fraud Centre reported that Canadians lost almost $6 million to scammers claiming to be from the Canada Revenue Agency in 2018. So how can you protect yourself?
CRA WILL contact you via:
- Phone
To verify your account, CRA may ask for your:
- Name
- Date of Birth
- Social insurance number
- Details of your account (such as information from your tax return)
CRA WILL contact you regarding:
- Notice of legal action to collect debts
- Location and name of your bank
- To begin an audit process
- To let you know you have mail in your online CRA account
- To provide a link to specific information you have asked for
CRA will NEVER:
- Text you
- Threaten you with arrest or jail time
- Ask for your passport number, driver’s license number, or any personal financial information
- Send threatening emails or voicemails
- Arrange to meet with you in person to collect payment
- Ask you to make immediate payment via e-transfer, bitcoin, prepaid credit card or gift cards
Steps to take if you receive a suspicious call:
- Request the Caller’s Name, Phone Number, and office location.
- Tell them you want to verify their identity.
- Then call CRA at 1-800-959-8281 (for individuals) or 1-800-959-5525 (for business) to confirm that they are a legitimate agent.
Staff Announcements
In 2020 we welcomed Deb Mainville and Greg Slemp to our team.
Jenna Harriman will be on maternity leave until August 2021 after the birth of her first child.
Community Involvement
The staff of GH&A are proud to be involved with the following organizations in our community:
- St. Rita’s Church in Rockyford
- Strathmore & Wheatland Chamber of Commerce
- Standard Lionettes
- Strathmore & Wheatland County Christmas Hamper Society
- Strathmore Pickleball Club
- Standard & District Ag Society
- Standard Municipal Library
- Strathmore & District Curling Club
- Wheatland County Food Bank
- Wheatland & Area Hospice Society
Social Media
Be sure to follow GH&A on social media for frequent updates and information on accounting and tax changes.
Disclaimer
The information in this publication is current as of December 15, 2020.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Gregory, Harriman & Associates LLP to discuss these matters in the context of your particular circumstances. Gregory, Harriman & Associates LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.