Webinar: Covid-19 Measures - 10% Temporary Wage Subsidy for Employers
Slide 1: Covid-19 Measures – 10% Temporary Wage Subsidy
Hello and welcome to Covid-19 Measures, the 10% Temporary Wage Subsidy.
I'm Matthew, your host for today.
We'll answer as many of your posted questions as we can at the end of the webinar. For any other tax related questions, call the business enquiries line.
Let's get started.
Slide 2: Introduction
This webinar will be of interest to you if you and your business want to learn more about the 10% Temporary Wage Subsidy.
Slide 3: Outline
Today we will discuss the following points:
- The 10% Temporary Wage Subsidy for Employers
- Who is an eligible employer
- Taking Advantage of the Temporary Wage Subsidy
- Calculating the Temporary Wage Subsidy
- Its relationship to the Canada Emergency Wage Subsidy
- The requirements for your books and records
- The self-identification form called PD27
- What happens if you are not eligible for this subsidy
Slide 4: Introduction to the Temporary Wage Subsidy
The Government of Canada announced a 10% wage subsidy called the Temporary Wage Subsidy for Employers.
The Temporary Wage Subsidy for Employers is a three-month measure that allows eligible employers to reduce the amount of payroll deductions required to be remitted to the CRA.
Slide 5: Introduction to the Temporary Wage Subsidy – Continued
This measure allows eligible employers to reduce the amount of payroll deductions of federal, provincial and territorial income tax remitted to the CRA.
The subsidy is equal to up to 10% of the eligible remuneration you pay from March 18, 2020 to June 19, 2020, up to $1,375 for each eligible employee and to a maximum of $25,000 total per employer.
Eligible remuneration is defined as any taxable or tax-exempt employment income, that is salary, wages, or bonuses.
Slide 6: Eligible Employers
An eligible employer has a payroll program account with the CRA as of March 18, 2020.
And paid salary, wages, bonuses, or other remuneration (including tax-exempt remuneration) to an eligible employee, that is, an individual employed in Canada, from March 18 to June 19, 2020.
And, is one of these: an individual; a partnership; a non-profit organization; a registered charity, or a Canadian-controlled private corporation, including a cooperative corporation.
Note that for a partnership to be eligible, the partnership members must consist only of individuals, excluding trusts, registered charities, other eligible partnerships, or eligible Canadian-controlled private corporations.
Also note that for a Canadian-controlled private corporation to be eligible, the corporation would have had a business limit greater than nil for their last taxation year that ended before March 18, 2020, determined without reference to the passive income business limit reduction.
Slide 7: Taking Advantage of the Temporary Wage Subsidy
You do not need to apply for the subsidy.
You will continue deducting income tax, Canada Pension Plan, CPP, contributions, and Employment Insurance, EI, premiums from salary, wages, bonuses, or other remuneration paid to your employees, as you currently do. To take advantage of the subsidy, you must calculate it manually when you are ready to remit these amounts to the CRA.
Once you have calculated your subsidy, you can reduce your current payroll remittance of federal, provincial, or territorial income tax that you send to the CRA by the amount of the subsidy.
If you take advantage of the subsidy, you have to report the total amount as income in the year in which the subsidy is used.
Slide 8: Taking Advantage of the Temporary Wage Subsidy – continued
Employers still must remit payroll deductions and employer contributions by the remittance due date.
Slide 9: Calculating the Temporary Wage Subsidy
The CRA will not calculate the amount for you.
You are responsible for calculating the subsidy manually.
This can be done in four steps.
Slide 10: Calculating the Temporary Wage Subsidy – Step 1
First, determine the number of eligible employees you had from March 18 to June 19, 2020.
For example, if you had 10 employees, five of whom were employed in Canada, then you have five eligible employees.
Slide 11: Calculating the Temporary Wage Subsidy – Step 2
Then, multiply the number of eligible employees by the maximum of $1,375 per eligible employee. This amount cannot exceed $25,000 per eligible employer.
For example, your five employees noted above, multiplied by the maximum would give you $6,875. This is less than the $25,000 maximum per eligible employer.
Slide 12: Calculating the Temporary Wage Subsidy – Step 3
Thirdly, calculate your gross payroll from March 18 to June 19, 2020, which means the total of the three month salary for each eligible employee.
If you paid your five employees $4,100 per month each, your gross monthly salary would be $20,500.
For the three month period, your gross payroll would be $61,500.
Slide 13: Calculating the Temporary Wage Subsidy – Step 4
Multiply your gross payroll by 10% to get your subsidy amount, making sure that the amounts do not exceed the maximums allowed.
So, in this calculation, using the maximum of 10%, your gross payroll calculation ends up as $6,150, which makes it $1,230 per eligible employee.
Both amounts are under the maximums: $6,150 is well below $25,000 per eligible employer, and $1,230 is below the $1,375 per eligible employee.
Slide 14: Calculating the Temporary Wage Subsidy – continued
So, in our example the total Temporary Wage Subsidy amount is $6,150, based on five employees over the three month period.
One can now reduce the income tax portion of the remittance by that amount, and remit the remaining income tax, the CPP contributions and the EI premiums to the CRA.
Slide 15: Calculating the Temporary Wage Subsidy – continued
If the income taxes deducted are not enough to offset the total eligible Temporary Wage Subsidy amount in a specific pay period, you can reduce future payroll remittances that fall outside of the 3-month eligibility period, that is after June 19, 2020, until you reach your total eligible Temporary Wage Subsidy amount.
Slide 16: Relation to the Canada Emergency Wage Subsidy
You may be eligible for both the 10% Temporary Wage Subsidy for Employers and the Canada Emergency Wage Subsidy, CEWS, which provides a subsidy of 75% of employees wages, up to a maximum of $847 per week per eligible employee.
Slide 17: Relation to the Canada Emergency Wage Subsidy - continued
Employers who are eligible for both subsidies can only claim a maximum cumulative subsidy of 75% of the eligible remuneration that they pay.
If you are eligible for both subsidies, you must reduce your CEWS claim by all amounts that you used under the 10% Temporary Wage Subsidy for Employers in the same period.
However, if you only want to claim the CEWS for a specific period, you may elect for the 10% Temporary Wage Subsidy for Employers to be equal to 0% of the remuneration you pay for that period.
Slide 18: Refunds
There are two instances where an employer can request a refund.
First, If they have a credit in their payroll program account after their remittances have been reconciled with their 2020 T4 slips and summary.
And, if they do not have income tax remittances to reduce because they pay tax-exempt salary and wages.
Slide 19: Keeping Records
To document your Temporary Wage Subsidy calculation, keep the following records;
- the total remuneration paid from March 18 to June 19, 2020
- the federal, provincial, or territorial income tax deducted from the remuneration paid
- CPP And EI premiums deducted from the remuneration paid
- And the total number of eligible employees from March 18 to June 19, 2020
Slide 20: Self-identification form (PD27)
As an eligible employer you should notify the CRA by completing and sending in Form PD27 - the 10% Temporary Wage Subsidy Self-Identification Form for Employers for each of your payroll accounts.
Slide 21: Self-identification form (PD27) – continued
It is best to provide all the information requested in Form PD27 as soon as possible to avoid receiving a discrepancy notice at the end of year.
You do not need to wait to file your T4 information return.
Slide 22: Self-identification form (PD27) – continued
As eligible for the Temporary Wage Subsidy, you should complete and submit Form PD27 to the CRA if you want to:
- take advantage of the Temporary Wage Subsidy, but have not reduced your remittances
- take advantage of the Temporary Wage Subsidy and have already reduced your remittances
- take advantage of the Temporary Wage Subsidy and have already reduced your remittances, but have not used your full eligible Temporary Wage Subsidy amount
- take advantage of a reduced percentage of the Temporary Wage Subsidy
- take advantage of the Temporary Wage Subsidy, but your pay period falls outside the 3-month eligibility period
- claim the CEWS, but do not want to take advantage of the Temporary Wage Subsidy
Slide 23: Self-identification form (PD27) – continued
In Part D of the form, include:
- the total number of eligible employees employed in the 3-month eligibility period,
- and the following for each pay period in the 3-month eligibility period:
- total payroll issued
- total income tax deducted
- total CPP contributions and EI premiums deducted, including the employer's portion
- the eligible Temporary Wage Subsidy amount claimed, and
- the percentage of the Temporary Wage Subsidy claimed
Slide 24: Self-identification form (PD27) – continued
You can submit the web version of the PD27 form through My Business Account
Or complete a fillable PDF, that is available online, and submit it to the CRA through My Business Account using the Submit Document feature, or send a plain PDF by mail or fax to any National verification and Collections Centre.
Slide 25: Subsequent ineligibility
If you reduced your payroll remittances, but it is later determined that you were not eligible for the subsidy, the CRA will assess you for the income tax that you deducted from your employees' pay but did not remit.
This assessment may include penalties and interest.
Slide 26: [Q&A]
Now, we'll take a look at some of your questions.
Slide 27: Question 1:
Our first question is:
What happens if we over-claimed TWS?
If you took advantage of the TWS in excess of the amount that you would be eligible for, the CRA may assess you for the income tax that you deducted from your employees but did not remit.
It is recommended that you send in the ineligible amounts claimed, as soon as possible, through the channel you use to submit your remittances.
Slide 28: Question 2:
Our second question is:
We claimed the TWS based on the instructions of remuneration PAID between March 18 and June 19th, but the form PD 27 asks for PAY PERIODs. So how do we account for this when reporting?
If the pay period was prior to March 18th and the employees were paid between March 18th and June 19th, the remuneration may be eligible for the TWS. Pay periods during the eligible period of March 18 - June 19th whose pay dates occur after June 19th will not be eligible for the TWS.
For example: In a monthly pay period of June 1 - June 30th, if the payments were issued on June 30th, the June payroll will not be eligible for the TWS. If the pay period was March 1 - March 13, and payments were issued on March 18th, the amounts may be eligible for the TWS, if all other eligibility criteria are met.
In Part D of the PD27, enter the pay periods and, in the additional comments, state the dates when the payment were made.
Slide 29: Question 3:
If our company is eligible for both TWS and CEWS, can we apply CEWS only instead of applying TWS and then subtract the amount of TWS from CEWS?
If you are eligible for both the CEWS and TWS and want to claim the CEWS only, you should complete the PD27 form to elect for your TWS to be 0. When completing the CEWS application, you will enter $0 for the TWS amount.
Note, the TWS and CEWS interact only in the 1st four claims period of the CEWS. If you previously elected 0% on the CEWS for the TWS and would like to take advantage of the TWS, you will need to amend your CEWS claims for the periods that you want the TWS.
Slide 30: Question 4:
Our fourth question is:
We have not reduced our remittances, and would like the money returned to us. How do we do that and when will those funds be paid out?
If you have not reduced your remittances, you can still do so. Also, a refund can be requested by completing the additional comments section of the PD27 form. Refunds will be issued after the 2020 T4s have been processed.
Slide 31: Question 5:
Do you include non-paid taxable benefits, (for example company paid group insurance premiums; auto standby charges, when reporting earnings on the PD27 and also on T4 boxes 57-60. I know that they do need to be included on box 14 of the T4.
The subsidy amounts do not have to be reported on the T4. If you receive the subsidy, you have to report the total amount as business income in the year in which the subsidy is received.
Eligible remuneration includes any taxable or tax exempt gross employment income such as salary, wages or bonuses including non-cash taxable benefits.
Slide 32: Thanks!
Tax administration is as complex as life itself. If the content today doesn't quite fit your situation, please:
- Visit our web sites: Canada.ca/coronavirus or Canada.ca/taxes
- Call CRA's business enquiries line at 1-800-959-5525
- You can also go to canada.ca/cra-videos, where you'll find all our business webinars.
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