On July 27, 2020, CRA announced that the original payment deadline extension of September 1, 2020, had been extended to September 30, 2020.
The key here is that interest and penalties are waived so long as the tax return is filed and all amount owing paid by September 30, 2020. Keep in mind that there are two different deadlines: the filing deadline and the payment deadline. CRA has clarified that even if the returns were not filed by the earlier filing deadline, no late filing penalty will be charged as long as the return is filed and taxes owing paid by September 30, 2020. Previous communication was not clear if late filing penalties would apply. This is a welcome clarification!
To read more on CRA's release, click here.
The federal government has updated the Canada Emergency Wage Subsidy rules for claim periods starting July 5 and ending November 21 (with potential extension to December 19). The rules became more complicated while allowing more businesses to qualify for the subsidy.
Here is a quick overview of significant changes:
- The subsidy nature changed from "all or nothing" to a sliding scale where the amount of the claim relies on the percentage of the revenue drop.
- Various alternative periods were added to the baseline remuneration calculations.
- July 5, 2020 to August 29, 2020 periods will be calculated using both original and new rules and the highest claim amount will be paid out.
- The new subsidy is split into two parts: base and top up. While more businesses can qualify now, it is harder to get the maximum amount of the subsidy. Previously, once businesses had crossed the 30% revenue drop, the maximum subsidy ($847/week) would be available as long as you met the revenue drop test.
- Previous elections related to the reference periods can be changed for periods 5 and on.
- Businesses that elected to use the cash method for revenue calculation do not appear to have an ability to change that election and must continue using the same method (cash or accrual) for all claim periods. There are some new rules for businesses that normally use the cash method for their accounting (farmers, fisher, etc.).
- There are a number of welcomed changes to how the revenue test is calculated for businesses that went through a reorganization in the last two years.
- "14 days" rule for eligible employees no longer applies for periods after July 5, 2020.
- The deadline for claim submission has been extended to January 31, 2021.
What can you do for your business at this point?
• Ensure your bookkeeping is up to date with monthly financial reports available as any analysis requires monthly sales and monthly accounts receivable amounts.
• Ensure that you have payroll information available going back to March 1, 2019, as new alternative methods of calculating Baseline Remuneration might require it.
• Ensure that you have timesheets available for your team members that have irregular hours. Regardless of your pay frequency (bi-weekly, semi-monthly, or monthly), the earnings for people with irregular hours must be calculated on a weekly basis which requires daily hours worked in addition to their pay stubs.
What can Pivotal team do for your business?
We have spent long hours studying and analyzing the CEWS rules. Our team is able to navigate you through the subsidy process and develop a custom solution for you. The projects can range from just a few phone calls to clarify the rules, to a review of your work, and to preparing and filing the claims on your behalf.
Reach out to the Pivotal team member you normally deal with directly or give us a call 403-347-2226.