Tax Tip Thursday

You will receive a T4A for whatever CERB payments that you received. It is income and has to be claimed. If you qualified for all the seven periods, you received $14,000. That will cause you to owe about $65 in taxes, so you will probably be ok.

If you had any additional income during the first quarter of the year, then you will potentially owe taxes depending on how much tax was taken off at source during the first quarter.

You will also receive a T4A for whatever CRB payments that you received. CRB is the extension of CERB, BUT, it is much more like EI in that you have to reapply every 2 weeks. If you collected the 12 weeks that were available (6 x 2 week periods), that would be an additional $5400 as they are taking $100 in taxes for every $1000 in benefits.

If you collected this in addition to the CERB, you will have total income of $20,000 now. Luckily you have paid $600 in taxes against the $1400 that would be owing.

Again, depending on how much money you earned in the first quarter, that amount could go up or down. Hopefully you set aside some money for taxes. The best thing you can do if you collected both CERB and CRB is to find out where you stand as early as possible to at least give you options.

The CEBA loans. These were the $40,000 and then $20,000 loans available to small businesses. You are required to include the forgivable amount of the loan into income IN THE YEAR YOU RECEIVED THE LOAN!

For the first $40,000, you have to take $10,000 into income. For the second $20,000, you will be taking an additional $10,000 into income. I think most people didn’t go after the extra $20,000 until this year, which will make it a little easier on you, but this is going to cause some people some pain. Presumably, you had a significant level of expenses with a lot less revenue for the period, so hopefully it will be a wash for you. But again, I strongly encourage everyone whoo took these loans to find out sooner rather than later where you stand with your taxes.

CEWS is the wage subsidy available to businesses with payroll that suffered a decline in revenues. The wage subsidy certainly helped a lot of small businesses, up to as much as 75% of the wages that were paid. BUT

You do need to include the subsidy into income. All other things being equal and if your revenues were down, it probably will not have a significant tax impact, but you really want to find that out as early as possible to give you the most amount of time possible to deal with the tax implications.

CERS is the rent subsidy available to businesses with monthly rent, lease, or mortgage payments that suffered a decline in revenues.

There were two programs for this.

The first program was deemed fairly unsuccessful, but it probably did help some businesses. It was contingent on the landlord applying for the subsidy and absorbing 25% of the monthly rent or lease payment. This program ended September 30, 2020.

Personally, I see the second program as being much more successful. This program mimics the wage subsidy above. The only difference is that it is based on the rent, lease, or mortgage payment instead of your payroll.

You do need to include the subsidy into income. All other things being equal and if your revenues were down, it probably will not have a significant tax impact, but you really want to find that out as early as possible to give you the most amount of time possible to deal with the tax implications.

I really wanted to make sure people know that there are POTENTIALLY tax impacts to some of the assistance you might have received, It is best if you find out sooner rather than later. You still have some time to do something about it!

If you would like more information about any of these topics or want some help with your taxes, please don’t hesitate to reach out or subscribe to our monthly newsletter!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.