Include the CEWS subsidy on your returns
The Canada Emergency Wage Subsidy (CEWS) is taxable. You must include the amount of CEWS you receive on your annual tax return (e.g. Corporation Income Tax Return, Partnership Return, etc.) when calculating your taxable income.
For the 2020 tax year, you will also be expected to report the amount of the CEWS that was used to pay each of your employees’ salaries by using a special code in the “other information” area at the bottom of the employees’ T4 slip, Statement of Remuneration Paid. This additional reporting requirements will apply to all employers.
Note that employers who have already filed their T4 slips and summary for 2020 will not need to refile.
How to report employment income during COVID-19 pay periods
For the tax year 2020, in addition to reporting employment income in Box 14 or Code 71, use new “other information” codes when reporting employment income and retroactive payments in the following periods:
Code 57: Employment income – March 15 to May 9
Code 58: Employment income – May 10 to July 4
Code 59: Employment income – July 5 to August 29
Code 60: Employment income – August 30 to September 26
Eligibility criteria for the CERB, CEWS, and CESB is based on employment income for a defined period. The new requirement means employers should report income and any retroactive payments made during these periods.
Example
If you are reporting employment income for the period of May 16 to May 29, payable on June 5, use code 58.
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At Arria CPA, we have been closely following the CRA's developments during the pandemic, and are happy to share our knowledge with you. Contact us for a free, no-obligation consultation to learn more about how we can help you report the tax impacts of COVID-19 on your business.
Disclaimer: Please note that this is only a brief summary and is based on current accounting regulations and tax law interpretations. Accounting regulations and tax laws are subject to continual review and change, so should the facts provided to us be inaccurate or incomplete, or should the law or its interpretation change, our summary may be inappropriate for your uses. This article is written for educational purposes only, and as such, we recommend you consult a professional before making an accounting or tax decision. If you have any concerns, or would like further consultation regarding this matter, please contact us.
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