February 7, 2021,

 

Dear Clients & Friends,

Hope everyone is having a safe 2021!  As we look forward to warmer days ahead, I wanted to provide an update on recent government benefits, tax deadlines and some tax tips.  In this edition, we review the following:

1. RRSP Strategies
2. Home Office Expense Deductions
3. 2020 Personal Income Taxes
4. Tax Deadlines
5. CRA updates
6. Advisory, Tax Planning and Cash Flow Planning
7. Covid-19 Government Support updates
   1. New: (Ontario small business support grant & filing of form PD27
   2. Ongoing Covid-19 Government Support updates

We have been working very hard in providing personal tips & accounting, tax and business content on social media.   Please connect and follow the links to my social media at your convenience (Facebook, Twitter, LinkedIn, Instagram) to stay fully updated on COVID-19 and tax planning tips for individuals & businesses.

   

If you get an opportunity, please also provide a google review available at the following link:

AR Jaffer Professional Corporation Chartered Professional Account Google Review

 

1 – RRSP Strategies

 

With the RRSP deadline fast approaching on March 1, here are some tips to consider for RRSPs:

1. Invest the income tax refund you receive into your TFSA, your 2021 RRSP or a non registered investment.
2. Open a spousal RRSP account allowing for a more balanced income at retirement.
3. Defer the tax deduction.  Depending on your income tax bracket, you may want to defer the tax deduction to future years when you are in a higher tax bracket.
4. Donate an RRSP to reduce taxes.  This will reduce the taxes paid by your estate.
5. Encourage your children to create RRSP room by starting a small business or  seeking part time employment.

2 – Home Office Expense Deductions

 

As approximately  40-45% of Canadians worked from home for a portion of 2020, CRA has introduced a modified home office expense deduction for 2020.  If you worked from home for at least 50% of the time for at least 4 consecutive weeks, you could be eligible for a deduction.

Here is a summary of the methods:

 

1. Temporary Flat Method
   • Deduction of $2/day, up to a maximum of $400.
   • To calculate work days, individuals must use days that they worked full-time or part-time hours from home, but not days off, vacation days, sick leave days or other days of absence.
   • Multiple people working from the same home can each make this claim.
2. Detailed Method
   • Obtain a simplified T2200S form from your employer (form T2200S is a simplified version of the T2200 form).
   • Individuals must have supporting documents in the event of a CRA review.
   • Employee can claim specific eligible expenses.
   • Eligible expenses include electricity, heating, water, maintenance and rent, but not mortgage interest, property taxes or home insurance (unless a commission employee).
   • employee’s deduction for the allowable expenses is limited to the employment use of the work space.
   • eligible employees can also include a deduction for office supplies (e.g., postage, stationary, ink cartridges) and other expenses (e.g., the employment use of a cell phone,
   • long distance calls for employment purposes).
   • Employees cannot claim any expenses that were or will be reimbursed by their employer.

If you require assistance with the distinction of the 2 methods, please contact our office.

1. Personal Income TaxesWith the tax deadline of April 30thapproaching, we have not been given any indication from the Federal government whether their will be any extensions this year.   I wanted to send out a gentle reminder regarding your 2020 tax documents.  Our office is open as part of the essential businesses in Ontario government.   We have a number of means of communication available to ensure our client’s needs can still be met including telephone, e-mail, and video conferencing.  If you would like to set up a meeting, please feel free to call the office.

Here are some suggestions for sending us your tax documents:

1. Similar to last year, we have added a box in our lobby for personal tax documents if you wish to drop them off.
2. You may also courier or mail your package to us as many have done in the past.
3. You may send us the documents digitally via any of the following options:
   1. Email
   2. Drop box
   3. Google drive
   4. Box

I have attached the 2020 income tax checklist for your convenience.

1 – CRA Tax Deadlines

Listed below are upcoming CRA deadlines:

• February 28, 2021 – Deadline for filing T4/T5 slips for businesses
• March 1, 2021 – Deadline to contribute towards RRSP’s
• April 30, 2021- Deadline for filing & payment of taxes owing for 2020 Personal Tax Returns
• April 30,2021 – Deadline for payment of HST payable for Self Employed
• April 30, 2021 – Deadline for payment of taxes owing for Self Employed Individuals
• June 15, 2021 – Deadline for filing Tax Return for Self-Employed Individuals
• June 15, 2021 – Deadline for filing of HST for Self-Employed Individuals

2 – CRA Updates

 

1. Enrol in your My Account to view your assessments and tax returns status:  https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/account-individuals.html.
2. CRA publishes processing times on their website.  This includes updates on tax returns and tax related requests:   https://www.canada.ca/en/revenue-agency/corporate/contact-information/check-cra-processing-times.html.
3. There is a new digital news subscription expenses credit.  You can claim up to $500 for amounts you paid in 2020 for qualifying subscription expenses. You must have paid the amounts to a qualified Canadian journalism organization (QCJO) that does not hold a licence to broadcast, for a digital news subscription to content that is primarily original news.

3- Advisory, Tax Planning and Cash Flow Planning

 

Whether you are an individual tax payer, sole proprietor or corporate business owner, many of us have experienced a challenging few months.  As part of our commitment and service delivery to our clients, with the recent pandemic, we have been working with our clients on the following:

1)Insurance tax planning – I work with insurance professionals to help grow your net worth and prepare estate planning strategies

2)Business Financing which includes:

a.$100k BDC working capital loan application

b.Bank loan proposals & applications

c.Lines of credit applications

d.Applications to various government loan programs in response to the COVID-19 pandemic

e.Preparation of business plans and cash flow projections

3)Cash Flow Planning & Budgeting

4)Tax Planning and Corporate Restructuring

5)Net Worth Analysis and Planning

6)Strategies to achieve your short term and long term goals

Please see our website for further details at https://www.arjcpa.ca/business-advisory-services/

1. Covid-19 Updates:

 

New Updates:

1- Ontario Small Busines Support Grant

As of Dec 26th 2020, eligible businesses can apply for funding to a maximum of $20,000 to help cover the decrease in revenue as a result of the Provincewide Shutdown

In order to receive the grant, a small business must:

• have fewer than 100 employees.
• be required to shut down or restrict services due to the shutdown effective 12:01am on December 26th .
• have had a decrease in revenue by a minimum of 20% when comparing April 2020 to April 2019 revenues.

Please contact us for further information or if you require assistance in the application process.

2 – Temporary Wage Subsidy (TWS) &  PD27 filing

For small business owners, this year as part of the T4 filing process, form PD27 must be filled out.  You were eligible to take advantage of the TWS, you may need to fill out and submit Form PD27, 10% Temporary Wage Subsidy Self-Identification Form for Employers, for each of your payroll (RP) accounts. The CRA will use the information from your Form PD27 to reconcile the TWS on your payroll (RP) accounts.

Form PD27 needs to be filled out and submitted to the CRA if you are eligible to take advantage of the TWS and:

1. you already reduced your remittances by 10% between March and June 2020.
2. you intend to reduce your remittances (the form will help you calculate your eligible TWS amount).
3. you claimed the Canada Emergency Wage Subsidy (CEWS) and, as a result, need to confirm on Form PD27 the amount of the TWS you are taking advantage of (refer to Line F of your CEWS application).

The form can be submitted online through your My Business Account

Ongoing Covid-19 Updates:

Here are the existing Covid-19 benefits as mentioned in the last newsletter.  The federal government has provided some recent updates on the various benefits related to COVID-19.  We can assist you with the application for these benefits.  The main items discussed in this newsletter are:

1. Canada Recovery Benefit (CRB)
2. Updates to the Canada Emergency Business Account (CEBA)
3. Canada Emergency Rent Subsidy (CRS)
4. Canada Emergency Wage Subsidy Update (CEWS)
5. Ontario Main Street Relief Grant ($1,000 maximum): PPE Support

Note that all the COVID-19 updates are available on our website at www.arjcpa.ca

 

For Individuals:

1. 1. Canada Emergency Response Benefit (CERB) & Transition to the Canada Recovery Benefit (CRB):
      • Even though the CERB has ended, you can apply for a period retroactively. The CRA is continuing to accept and process retroactive applications for period 7 (August 30 to September 26, 2020) through the CRA’s My Account or automated toll-free phone line.
      • The new Recovery Benefits known as the Canada Recovery Benefit (CRB) are available between September 27, 2020 and September 25, 2021.

 

CRB:

• The Canada Recovery Benefit will provide eligible workers with $1,000 for a 2-week period ($900 after taxes withheld) for up to 26 weeks for those who are not employed or self-employed due to COVID-19 and who are not eligible for EI, or had their employment/self-employment income reduced by at least 50% due to COVID-19.
• This benefit will be paid in two-week periods.
• If your situation continues past 2 weeks, you will need to apply again. You may apply up to a total of 13 eligibility periods (26 weeks) between September 27, 2020 and September 25, 2021.
• The Canada Recovery Sickness Benefit (CRSB) will provide $500 per week (taxable, tax deducted at source) for up to a maximum of two weeks, for workers who are unable to work for at least 50% of the week because they contracted COVID-19, self-isolated for reasons related to COVID-19, or have underlying conditions, are undergoing treatments or have contracted other sicknesses that, in the opinion of a medical practitioner, nurse practitioner, person in authority, government or public health authority, would make them more susceptible to COVID-19. This benefit will be paid in one-week periods.

If you require assistance with the application process, please contact our office.

Full details are available on the CRA Website at:   https://www.canada.ca/en/department-finance/economic-response-plan.html#individuals

 

For Businesses:

1. 1. The Canada Emergency Business Account (CEBA) Update:

New CEBA:

• As of December 4, 2020, CEBA loans for eligible businesses will increase from $40,000 to $60,000.
• Applicants who have received the $40,000 CEBA loan may apply for the $20,000 expansion, which provides eligible businesses with an additional $20,000 in financing.
• All applicants eligible for the CEBA loan have until March 31, 2021, to apply for the $60,000 CEBA loan or the $20,000 expansion.
• Every applicant must meet the following criteria:

1. Has an active CRA Business Number (BN) with an effective date of registration on or prior to March 1, 2020.
2. Has an active business chequing/operating account with the Lender at the time of applying for CEBA. Note: If Borrower currently does not have a business chequing/operating account the Borrower must create one at their primary financial institution before applying for CEBA.
3. Has not previously used the Canada Emergency Business Account Program (the “Program”) and will not apply for support under the Program at any other financial institution.
4. Intends to continue to operate its business or to resume operations.

• Business owners can apply for support from the Canada Emergency Business Account through their banks and credit unions.  An attestation with detailed qualification criteria must be signed prior to submitting the application
• Further information is available at:   https://ceba-cuec.ca/

 

Original CEBA:

• The original $40,000 CEBA has been extended to December 31, 2020
• The qualification requirements are as follows:
  • The Borrower is a Canadian operating a business as of March 1, 2020.
  • The Borrower has a CRA business number and has filed a 2018 or 2019 tax return.
  • Demonstrate that your organization has paid between $20,000 to $1.5 million in total payroll in 2019.
  • Applicants without at least $20,000 in payroll in 2019 will have to demonstrate having eligible non-deferrable expenses between $40,000 and $1,500,000 in 2020.  Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance. Expenses will be subject to verification and audit by the Government of Canada.
  • As of June 26, 2020, businesses eligible for CEBA now include owner-operated small businesses that do not have a payroll, sole proprietors receiving business income directly, as well as family-owned corporations remunerating in the form of dividends rather than payroll.
• The government will then provide interest-free loans of up to $40,000to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced.
• Repaying the balance of the loan on or before December 31, 2022will result in a loan forgiveness of 25 percent (up to $10,000).
• Business owners can apply for support from the Canada Emergency Business Account through their banks and credit unions.
• Further information is available at:   https://ceba-cuec.ca/

 

1. 1. Canada Emergency Rent Subsidy (CERS)

• Structured in a manner similar to the Canada Emergency Wage Subsidy (CEWS), the CERS takes over where the Canada Emergency Commercial Rent Assistance program (CECRA) left off.
• Under the CERS, qualifying organizations that have suffered a decline in revenue would be eligible to receive a subsidy in respect of certain of their real property-related expenses. There are, however, key differences between the CECRA and the CERS, including:
• Where the CECRA was only available in respect of small business tenants, the CERS can be claimed by businesses, not-for-profits and charitable organizations that own the real property that they use in the course of their ordinary activities, to assist in covering interest expenses on mortgages, insurance expenses and property taxes, except where that real property is used primarily to earn rental income from arm’s length parties, which disqualifies most commercial landlords from applying for the CERS.
• Unlike the CECRA, which was only available for small business tenants who paid a maximum of $50,000 in gross rent per location, the CERS can be claimed by renters and property owners of all sizes (assuming all other eligibility criteria are met).
• The CERS will be administered by the Canada Revenue Agency (CRA), as opposed to the Canada Mortgage and Housing Corporation.
• CERS provides benefits directly to renters, without requiring landlords’ participation).
• CERS is broken down into 2 subsidies:
  • the base subsidy and
  • the top-up subsidy, referred to as the “Lockdown Support”.
• Base subsidy – A maximum base subsidy of up to 65% of qualifying rent expenses paid, or deemed to be paid  in the qualifying period will apply until 19 December 2020. Similar to CEWS, the subsidy will be calculated on a sliding scale that gives more support to those entities with higher rates of revenue decline
• Lockdown Support – A 25% subsidy is available for eligible entities that have experienced any revenue drop (i.e., 1% drop in revenue would be sufficient) and are subject to a public health restriction that has been introduced in response to the COVID-19 pandemic (e.g., restaurants, fitness studios or retail stores that have temporarily shut down or have had their activities significantly limited by a mandatory public health order for a least one week). The Lockdown Support is adjusted according to the number of days in the qualifying period during which a particular property is subject to the public health restriction.
• For the base subsidy, the maximum amount of qualifying rent expenses that can be claimed for each qualifying period is $75,000 per location. The maximum amount of qualifying rent expenses that can be claimed for the affiliated group of entities for a qualifying period is $300,000. Accordingly, the maximum subsidy amount available under the base subsidy is $195,000 per affiliated group of entities per qualifying period (as described below).
• For the Lockdown Support, the maximum amount of qualifying rent expenses that can be claimed for each qualifying period is $75,000 per location. There is no overall cap that applies for an affiliated group of entities. Accordingly, the maximum Lockdown Support available is $18,750 per location for each qualifying period, but there is no upward limit for the amount of Lockdown Support available for an affiliated group (as described below).
• Organizations would be able to make claims retroactively for the period that began September 27.   Similar to CEWS, the CERS will be available until June 2021.

Eligible expenses if you rent a qualifying property

1. Rent (including rent based on a percentage of sales, profit or similar criteria)
2. Amounts required to be paid or payable by you under a net lease (either to the lessor or a third party). These required amounts might include:
   1. base rent
   2. regular payments for customary operating expenses, such as

i.    property insurance

ii.    utilities

iii.    common area maintenance

1. 1. property and similar taxes, including school and municipal taxes
   2. regular payments to the lessor for customary ancillary services

Eligible expenses if you own a qualifying property

1. Property and similar taxes:
   1. Includes school taxes and municipal taxes, if these are part of your property tax assessment
2. Property insurance
3. Interest on commercial mortgages for the purpose of purchasing real property
   1. Your mortgage amount cannot exceed the lesser of:

i.the lowest total principal amount secured by one or more mortgages on the property at any time after it was acquired or

ii.    the cost amount of the property

Further information is available at:   https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-rent-subsidy.html

 

1 – Canada Emergency Wage Subsidy (CEWS) Update:

·Changes to CEWS as of November 19, 2020:

i.        the subsidy is extended to June 2021

ii.        the maximum subsidy rate for periods 8 to 10 will remain at 65% (40% base rate + 25% top-up)

iii.beginning in period 8, the top-up rate and base rate are is now calculated using the same one-month revenue drop

iv.for periods 8 to 10, use the new top-up calculation or the previous 3-month average drop, whichever works in your favour

v.the deadline to apply is January 31, 2021, or 180 days after the end of the claim period, whichever comes later

vi.        starting in period 9, the calculation for employees on leave with pay now aligns better with EI benefits

·You can now calculate pre-crisis pay (baseline remuneration) for employees who were on certain kinds of leave, retroactive to period 5.

·The program will be available through My Business Account or through the Represent a Client service for Accountants.

·There will be an automatic audit for all employers to ensure compliance with the program.

·Please contact our office for assistance and we will prepare the calculations and applications for you.

Full details on the calculator and process are available at:  https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy.html

 

2 – Ontario Main Street Relief Grant: PPE Support

Main Street Relief Grant for Personal Protective Equipment (PPE) provides up to $1,000 for PPE costs to eligible small businesses across Ontario with 2 to 9 employees.

 

Eligibility:

To be eligible, your business must have two to nine employees and be in one of the following sectors:

·retail

·accommodation and food services

·repair and maintenance

·personal and laundry services

·gyms and yoga studios

 

Grant Amount:

Eligible small businesses will get one-time grants of up to $1,000.

 

Documents Required:

You will need to submit receipts or proof of costs for PPE purchased since March 17, 2020. This includes:

·gloves, gowns, face shields, eye protection, masks, sanitizer, sanitizing wipes

·thermometers, temperature monitors or cameras

·physical changes, including the installation of hand sanitizer stations and plexiglass dividers

·signs to guide or inform customers and employees

Please contact us if you require assistance with the application process.   Additional information is available at:  https://www.app.grants.gov.on.ca/msrf/#/

 

Stay Safe!

Best regards,