Canada Emergency Business Account

At the beginning of COVID-19 the Canadian Government introduced the Canada Emergency Business Account (CEBA). This is a helpful tool for businesses that are short on cash-flow due to the on-going pandemic. 

CEBA is an interest-free loan of up to $40,000 from the Canadian Government that is administered through your bank. If you pay it back by December 31, 2022, there is loan forgiveness of 25%, up to $10,000. During this time, you can make payments at whatever frequency you prefer. If you are unable to pay it back by December 31, 2022, it turns into a 3-year fixed loan with a 5% interest rate that is paid monthly. 

 

Qualification 

To qualify for CEBA: 

  • You must be a Canadian business that was already in operation on March 1 2020. 
  • Are registered with the CRA & have filed a 2018 or 2019 tax return 
  • Have $20,000 to $1,500,000 in payroll is 2019 
  • Have an active account with the financial institution, and will not apply for this loan with any other bank. 
  • Intent to continue business operations after taking the loan
  • Agree to take part of post-funding survey’s if requested by the government 

Note, the following do not qualify for CEBA: government organizations or bodies; unions; and religious, fraternal, or charitable organizations. 

If you are sole proprietor or pay yourself through dividends, the government has recently added expanded ways to qualify for this loan. You may now qualify if you have eligible, non-deferrable expenses of $40,000 to $1,500,000. These expenses can include rent, utilities, insurance, or property tax. All other qualification conditions apply, this is just an amendment to the payroll condition.

 

Applying

You must apply for CEBA online through your business’ primary financial institution.You will need your 2019 T4 Summary. This will provide you with your business’s payroll account number and total employment income reported (box 14), both of these are necessary to apply. 

You will need to check with your financial institution to see if they offer the loan. It is important to note, you must have a business bank account to apply.

 

Funding 

After you have applied, funding will hit your business’ bank account in 5 business days. 

You can not use funding for whatever you want. You must use it to pay for operating expenses that are not able to be deferred. This includes expenses like rent, payroll, or utilities. You may not use the loan to increase management salaries, pay the shareholder dividends, or refinance other existing debts. 

 

 

The above is a general guideline to CEBA, if you would like to learn more you can check out the government website here, or ask your bank for more details.

Climate Action Incentive

On January 1, 2020 the federal government instituted a carbon tax in Alberta. To help offset the amounts paid, they have also introduced the Climate Action Incentive for Alberta residents. 

 

Alberta is not the only province that this incentive has been introduced in. Residents in Saskatchewan, Manitoba, and Ontario will also see it this year. For the interests of the post however, it will only be referencing the Albertan incentive. 

 

You access this incentive when you are filing your 2019 tax return. Each family will be able to claim it once. By including this in your taxes, it ensures accurate and quick processing. It will also make sure that everyone will receive it, as everyone needs to file taxes! 

 

The incentive will be paid in a tier system, with larger families receiving more: 

 

  • $444 for single adults, or the first adult in a couple
  • $222 for the second adult in a couple, or the first child of single parent
  • $111 for each child in the family, or the second child on for single parents

 

If you are resident of a small or rural community, defined as anywhere out of a census metropolitan area (Alberta has three census metropolitan areas, Edmonton, Calgary, and Lethbridge), you are eligible for an extra 10% payment amount. This is to reflect the extra energy needs of those outside of major cities. You will need to indicate on your tax return if this is applicable to you. 

 

The amount of the Climate Action Incentive will change annually, based on the amounts of the federal carbon tax. Most Albertans are calculated to receive more back from this incentive than they will pay towards the carbon tax.

 

If you have any addition questions, you can ask your tax preparer, or check out the CRA website here

COVID-19 & Payroll

COVID-19 Update

To our valued customers,

 

COVID-19 is at the forefront of all our minds as the outbreak continues to spread. On-Core would like to assure you that we are closely monitoring the situation and acting based on all recommendations from the Public Health Agency of Canada. The health and well-being of staff and clients are our top priority as this situation progresses. We have increased cleaning of our office, instituted protocol to minimize the risk of exposure, and are making sure that staff who feel sick do not come to work.

 

In order to lower the risk for both staff and clients, and ensure the least disruption of your bookkeeping, we ask that clients please consider the following:

 

  • If you have returned from out of the country recently, or are feeling unwell, please have someone else drop off your work to us. If you are dropping off your work in person, we do have envelopes outside of the door, and you can put it in the mail slot on our front door.
  • If possible, consider an electronic option for your work. On-Core can send you a Dropbox link to make this easier.
  • Consider calling or emailing in to On-Core with questions, instead of having an in-person meeting.

 

 

Please note, that the Government of Canada has extended the personal tax deadline to June 1st. They have also extended the deadline to pay income taxes, interest free, until after August 31st.  The Canada Revenue Agency will also allow businesses to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after March 18, 2020.

 

On-Core will continue to provide all our regular services to our clients and strive to meet all deadlines. We also feel it is important to complete your personal tax returns as scheduled so please continue to bring in your paperwork.

 

A staff member will always be in the office to answer questions and be of assistance.

 

If your regular staff member is not available, you can call our main line at 780-640-8244.

 

Thank you for your continued support of On-Core. We appreciate all our staff and clients and want everyone to be safe and healthy.

 

If you have any questions, please let us know, and we will be happy to answer them.

EI 2020

EI rates have been announced and will again be changing in 2020. The amount of EI you will need to pay has actually decreased slightly this year. 

 

Below is a chart showing both the 2020 and 2019 EI information. 

 

2020 2019
Maximum Annual Earnings $54,200 $53,100
Contribution Rate 1.58% 1.62%
Maximum Annual Employee  Contributions $856.36 860.22
Maximum Annual Employer Contributions  $1,198.90 $1,204.31

For more information, and for past EI information you can visit the CRA website here.

Record of Employment

One of your payroll obligations is to create a Record of Employment (ROE) for your employees when there is an interruption in earnings. It is the document used by Service Canada when someone has applied for EI (this includes maternity leave).  Some employers are not aware of their requirement to file a ROE, which can be costly. As with everything government, there is a fine for not filing ROEs on time. They can charge the employer $2,000 or impose jail time of up to 6 months or both. 

 

If you are using a payroll program, it will assist you in the filing of your ROE. It will automatically fill out all the company and employee information. As well as all the blocks in section 15, which can be found below. This post will cover all the blocks that you will manually need to fill out in the payroll program. If you do not have a payroll program, you can find a more in depth guide to filling out an ROE here

 

Blocks on the ROE 

 

Block 6 – Pay Period Type

 

The frequency in which you pay your employees, for example, bi-weekly, monthly, or semi-monthly. If your employee is commission only, you would put weekly in this block.

 

Block 10- First Day Worked 

 

The day the employee started with your company. It is important to note, that if you have issued a previous ROE for this employee, that the first day worked is the first day worked after their previous leave, not their first day with the company.

 

Block 11 – Last Day for Which Paid 

 

This block is where you put their last day of employment with your company. It may not necessarily be the last day in which they physically worked. If they took vacation pay, or paid sick leave, it will be the date that these payments ended. 

 

Block 12 – Final Pay Period Ending Date 

 

This block corresponds with block 11. You need to enter in the last day of the pay period that they employees last day falls into. 

 

Block 14 – Expected Date of Recall 

 

If you have laid off an employee for a set amount of time, or they have gone on Maternity leave, you can put the date that you expect them to come back to work in this block. If you do not expect them to return to your company, you can click off not returning.

 

Block 15

 

Block 15 is comprised of 3 areas: 

 

Block 15A – Total Insurable Hours

Block 15B – Total Insurable Earnings

Block 15C – Insurable Earnings by Pay Period 

 

As mentioned above, a payroll program will fill in these sections for you. If you need to do it manually you can follow the link above, or talk to a payroll professional.

 

Block 16 – Reason for Issuing ROE

 

In this block, you need to inform Service Canada for the reason you are issuing the ROE. Common codes can be found in the chart below. 

 

Code Reason
A Shortage of work/ end of contract season 
D Illness or Injury 
E Quit
F Maternity Leave
G Retirement 
Returning to school for apprentice training
M Dismissal
Leave of Absence 
Parental 

 

One less used code that many employers do not know about it code K, Other. If you change payroll service providers, you need to file an ROE for your employees. You would use Code K, Other/Change in Service provider.

 

Block 17A – Vacation Pay 

 

Employees are entitled to vacation pay. In this block you need to tell Service Canada how you have paid it out to them. The two most common methods are: 

 

-Included with each pay

-Paid because no longer working – if you use this explanation, you will need to enter the amount you have paid out to the employee

 

Block 17C – Other Monies 

 

You use this section if you have paid out money to an employee, other than vacation pay, at their time of interrupted earnings. For all these reasons, you will need to enter in the amount paid out to them. 

Some examples of monies in this section are: pay in lieu of notice, severance pay, or bonuses. 

 

Deadlines for filing ROEs 

 

If you are preparing a paper ROE, the filing deadlines are within 5 calendar days of either:

 

  • The first day of the interruption to earnings
  • The day the employer learnt about the upcoming interruption  

 

If you are preparing an electronic ROE, the filing deadline is whichever of the following comes first: 

 

  • 5 calendar days after the end of the last pay period
  • 15 calendar days after the first day of the interruption to earnings 

 

Web ROE 

 

All employers should sign up for Web ROE. This allows you to file and amend ROEs electronically. It is the faster, and more efficient way to do ROEs. You can find a link to Web ROE here

 

If you have any questions, you can contact the Service Canada Employer line at 1-80-367-5693. Or talk to your accountant or bookkeeper.

TFSA

A Tax-Free Savings Account is a useful tool in your savings arsenal. However, many people do not understand that there are rules to how much you can contribute to a TFSA each year. If you over contribute the CRA can and will charge you a tax. This post will cover FAQs about TFSAs. Including, what a TFSA is, how much you can contribute, and what penalties you will face if you exceed the limit.

 

What is a TFSA?

 

The government started this program in 2009, and it is available to anyone over 18 who has a valid SIN. It allows for an investment that is free of tax, this includes all money gained within investments, and tax-free withdrawals. However, this also means that unlike RRSPs you will not get a tax-deduction when you invest in a TFSA. 

 

No one besides yourself can contribute, withdraw money, or make decisions about investments  in your TFSA. 

 

 Will it affect government benefits?

 

Any money that is made within a TFSA or withdrawn from one, will not affect any government benefits that you have or will apply for. This is true for retirees, and people still in the workforce. 

 

How much can you contribute?

 

The CRA will publish the annual contribution limit for TFSAs for that calendar year. You can not exceed this amount if you have maxed out your previous years TFSA limit. However, if you have spare room from the previous year or you had withdrawn money in the previous year, you can add this to your contribution limit. 

 

If you have never opened up a TFSA, you are eligible to contribute $63,500 as of today, because your contribution limit accumulates. The breakdown of this is as follows: 

 

Years Contribution Limit 
2009 – 2012 $5,000
2013-2014 $5,500
2015 $10,000
2016-2018 $5,500
2019 $6,000

 

How can I find out my contribution limit?

 

If you want to find out your contribution limit, you can:

 

  • Phone the CRA TIPS line at 1-800-267-6999
  • Visit your CRA Individual Account

 

Can I have more than one TFSA?

 

Yes, you are allowed to have more than one TFSA, however it is your responsibility to ensure that you are not over contributing. 

 

What is the penalty for exceeding the contribution limit?

 

The CRA will charge you 1% of the highest excess amount in the TFSA for that month. They will continue doing this each month that the over contribution remains in your account. This can add up quickly! 

 

Where can I find more information on TFSAs?

 

You can check out the CRA website from the below links, or talk to your accountant or financial planner! 

 

TFSA Basic Information

TFSA Contributions

CPP 2020

CPP rates have been announced and will again be changing in 2020, this is part of the first phase of the CPP enhancement program started by the government in 2019. 

 

Below is a chart showing both the 2020 and 2019 CPP information. 

 

2020 2019
Maximum Annual Pensionable Earnings $60,100 $57,400
Basic Exemption $3,500 $3,500
Maximum Contributory Earnings  $56,600 $53,900
Contribution Rate 5.25% 5.10%
Maximum Annual Employer & Employee Contributions $2,972 $2,748.90
Maximum Annual Self-Employed Contributions  $5,944 $5,497.80

 

The CPP enhancement program sees rates rising until 2023, where they will reach a 5.95% contribution rate. 

 

After 2023, the second phase will take place, where two different rates will be in effect.

Once you have reached the first earnings limit, you will move to the second tier and contribute 4% on this income until you reach the second earnings limit. 

 

You can find more information on this program here.

Do you need to make installments?

Whether business or personal, everyone knows that the time will come when they must pay the CRA. However, what may surprise you is that the CRA sometimes demands their money in installments. You need to be prepared to make these installments, or the CRA will charge you interest and penalties. Below are the thresholds to watch out for, so you can budget and avoid paying the CRA more than you need to! 

 

Personal Installments 

 

You must pay personal tax installments if:

  • Your previous years personal taxes owing were over $3,000
  • Your current years taxes are estimated to be over $3,000 owing

 

Note, if your current year taxes will be less than $3,000 owing, you will not need to pay installments even if your previous year was over the threshold.  

 

The CRA will send you installment reminders in either February or August. The only time you should ignore these are if your current year taxes will be under $3,000. 

 

If you don’t remit installments the CRA will charge you interest and penalties.

 

You can find more information on personal tax installments here.

 

Business Installments 

 

Businesses must also pay installments to the CRA for their corporate taxes and GST. As with personal installments, if you do not make your installments to the CRA, they will charge you interest and penalties. 

 

You will notice that $3,000 is the running theme throughout the rules for installments. This is also the magic number the CRA has chosen for corporate taxes and GST. 

 

Corporate Taxes

 

Corporate tax installments are very similar to personal taxes, you will not have to make installments if your taxes are less than $3,000 owing in the current or previous year. Or, if the corporation is new, installments will not need to be made in the first year of operation. 

However, even if your company falls into one of these two scenarios and you do not have to make installments, you must ensure that the taxes are paid by the due date. Or the CRA will still charge you interest. 

 

Installments for corporate taxes can be made either monthly or quarterly. To calculate the installments due you can either use what you estimate this years taxes owing will be or use the previous years tax number. The CRA will charge you interest if you chose to estimate this years taxes and you have remitted less than the actual amount. 

 

You can find more information on corporate installments here

 

GST 

 

GST installments are only applicable if you are an annual filer. You will need to make them no later than a month after each of your fiscal quarters. The rules are the same as all other installments, they must be made for GST if the amount owing in the previous year or current year is over $3,000. As with corporate taxes you can calculate the installment amount by either using the previous year GST owed, or estimate the current years. Again, they will charge you interest if you estimate too low.

 

You can find more information on GST installments here.

 

It is important to understand your installment obligations, as it will save you money in interest & penalties. Talk to your accountant or bookkeeper and they can help you determine the amount to pay and when.