The new wage subsidy bill, the Canada Emergency Wage Subsidy (CEWS), was adopted this past Saturday, April 11th, 2020 by Parliament in hopes of adding another tool to aid the struggling Canadian economy and to support businesses, and the workers they employ, during the current COVID-19 crisis. This new bill is just the latest tool the government has deployed in helping the Canadian economy and Canadians, but it will probably not be the last.
Many questions we have been getting at Rawluk & Robert CPAs is “What do I qualify for?” or “What benefits am I entitled too?”. Whether you are an individual, a small business, a student or living abroad, our hope is to simplify all the subsidies and benefits here to help you answer those questions.
CANADA EMERGENCY RESPONSE BENEFIT - CERB
This is a taxable benefit of $2,000/month for up to four months. You can apply through My Account or through a Service Canada application process. People who are signed up for Direct Deposit have received the funds within 2 business days.
To be eligible to receive the benefit you must have had employment income or self-employed income of at least $5,000 in 2019 or in the 12 months prior to the date of the application. You also must have been or expect to be without employment, self-employment income or non-eligible dividends for at least 14 consecutive days in the initial four-week period. For subsequent benefit periods, you expect to have no employment income.
If you are normally eligible for employment insurance (EI) can continue to apply through EI and Service Canada, and they will automatically be enrolled in the CERB.
Who is Eligible?
TEMPORARY WAGE SUBSIDY FOR EMPLOYERS
One of the first initiatives from the federal government was the temporary wage subsidy, which would cover 10% of total remuneration paid to employees between March 18th and June 20th, 2020, up to $1,375/employee and $25,000/employer. This subsidy would not have to be shared among associated CCPCs and employers would be able to reduce the remittance of income tax paid to CRA through their regular source deductions payments. CPP and EI must be paid as normal and cannot be reduced.
This subsidy received by employers will be considered taxable income in the year it is received.
Who is Eligible?
CANADA EMERGENCY WAGE SUBSIDY - CEWS
The CEWS is designed to encourage employers to continue keeping employees on the payroll or encourage them to hire back employees who were laid off due to a decrease in revenue. Employers will now be able to count on direct payments from the government to cover a significant portion of most wages for the next three months. The CEWS offers businesses a 75% wage subsidy for those employers who qualify
If individuals are already receiving a subsidized salary through the CEWS, they are not eligible for the CERB.
Who is Eligible?
This subsidy will be available for up to 12 weeks and is retroactive to March 15, 2020.
Businesses will not be able to benefit from both the Temporary Wage Subsidy for Employers and the Canada Emergency Wage Subsidy. If a business has already benefited from the 10% temporary wage subsidy, they are still eligible for the CEWS but will receive 65% as a subsidy instead of the full 75%.
CANADA EMERGENCY BUSINESS ACCOUNT
The government announced interest-free loans of up to $40,000 to eligible small businesses and non-profits. The loans will be interest free if paid back before December 31st, 2022 with $10,000 being forgiven if paid back before then. Interest will start accruing on any unpaid amounts at 5% and converted to a 1-year term loan if not paid back before December 31st, 2022.
Who is Eligible?
WORK-SHARING PROGRAM EXTENDED
The federal government is extending the Work-Sharing program from 38 weeks to 76 weeks. There are also no limitations on the extension to one specific sector or industry.
INCOME TAX DEFERRALS
Individuals have an extension to file their 2019 personal tax returns until June 1st, 2020. Any new income tax balances due, or instalments, are also deferred until after August 31st, 2020 without incurring interest or penalties.
All businesses can defer, until after August 31st, 2020, payment of any income tax, corporate tax and GST (Part IV tax is not included), amounts that become owing on or after March 27th and before September 2020. This includes corporate tax owing and GST payments and instalments. Any GST/HST payment that becomes owing from March 27th until the end of May can be deferred until the end of June.
My Account for Individuals is a secure portal that lets you view personal income tax
and benefit return information and manage your tax affairs online.
This is a great way to keep track of your important documents, stay organized and keep up to date with all your tax information.
My Account is:
Some of the many things you can track when you register are; your refund, view or change your return, check your benefit and credit payments, view your RRSP, set up direct deposit, receive e-mail and so much more.
You will need:
To register for My Account, select CRA register at the following link:
Step 1 – Provide Personal Information
Step 2 – CRA Security Code
After completion of step one, you will have access to limited information until you enter your CRA security code. You will receive your CRA security code in the mail within two weeks or less. After you enter your CRA security code, you will have access to the full suite of service in My Account.
Step 3 – Enter CRA Security Code
As of the passing of the Province of Manitoba budget 2018, Bill 34 now allows licensed chiropractors in Manitoba to incorporate their professional services and to benefit from the potential tax savings that comes with it. What does that mean for you, the professional Manitoba chiropractor?
To begin with, a professional corporation is one that provides professional services and is regulated by a governing professional body such as the Manitoba Chiropractors Association. Generally, only those professions that are governed by a legislative professional body or association and have been legislated by government will be allowed to incorporate.
There are many reasons why this is appealing to a professional’s practice but the ability to use tax deferrals on professional income is a reason for many to incorporate. Prior to 2018, all licensed chiropractors who chose to practice in Manitoba were required to recognize their professional income at higher tax rates. In Manitoba, these higher tax rates could be as much as 50.4% on net professional income over $205,800.
With incorporation, the possibility of deferring this tax until a later date is possible. Income recognized through a corporation, where taxable income is below $500,000, would benefit from a 10% (9% in 2019) tax rate in Manitoba, which is a 40.4% (41.4%) tax drop from the personal tax rates. Shareholders could then pay themselves from the corporation as either employees or shareholders through salary or dividends respectively. All other money that is left in the corporation could be held within the company and reinvested or paid out in the future when the shareholders are in a lower tax bracket.
If a corporation qualifies as a qualified small business, the future sale of shares of the corporation may be done on a tax-free basis. When planning on retiring, chiropractors can sell their shares to another party and use their capital gains exemption on the sale to recognize either no taxes on the sale or a drastically reduced amount.
As with most professional corporations, only a licensed member of the Manitoba Chiropractors Association will be able to hold voting shares and act as a director and president in a chiropractic corporation. Non-voting shares can be held by family members or a spouse. Careful consideration must be used when splitting income with family members in order to avoid any additional tax on that split income.
Incorporation also provides some Protection and liability limitation compared to a sole-proprietorship or partnership. The corporation would not protect you if you were sued for malpractice, your professional insurance would cover you in those cases. A corporation would offer some protection of your personal assets from third party creditors in case your corporation was unable to pay any outstanding debts.
Many chiropractors today have also been working for many years and have purchased many assets over their professional careers. Incorporation allows for a transfer of these assets to the corporation from an individual on a tax deferral basis, so chiropractors can continue using their current equipment and assets without having to pay tax on the transfer of these assets to your new corporation.
A transfer of equipment and other assets to a corporation also allows for a possible release of money built up in the assets. Depreciation is usually calculated at a rate deemed reasonable by CRA but unfortunately, this is not always the case. Equipment and assets can be transferred to the corporation at the fair market value of the item, which in turn allows for more money to be withdrawn from the corporation at a reduced rate of tax. If the fair market value is greater then the tax value, taxes may apply as well.
If you are a licensed Manitoba chiropractor and are interested in incorporation but have more questions or would like to discuss your options further, one of our staff would be happy to sit down with you to discuss this subject with you.
Before taking any steps, it is recommended to sit down with your accountant and lawyer before proceeding with incorporation as there can be a lot of difficult questions that can be helped by having a professional assist you in this process.
Please see the following link for the full Bill 34, which goes into further detail about incorporation and chiropractors of Manitoba.