TurboTax wants to ensure accuracy with the information we have provided in this article, all content will be updated as we learn more from the Canada Revenue Agency and the Government of Canada.
What is the Canada Emergency Wage Subsidy?
The Canada Emergency Wage Subsidy (CEWS) provides financial support to protect jobs and help businesses. The recent update states that the government is determined to extend the program to June 2021. The subsidy consists of a base subsidy for all employers whose revenue has been affected by the COVID pandemic, and a top-up subsidy for employers who are hardest hit. The program aims to assist those businesses in retaining their employees or even re-hiring those they’ve laid off.
This program is separate from the Temporary Wage Subsidy previously created. The benefits, eligibility, and processes differ. For more information if you are affected by the Temporary Wage Subsidy, click HERE.
Which businesses are eligible?
CEWS will benefit many Canadian businesses who:
- Had a CRA payroll account on March 15th,2020,
- Didn’t have a payroll account but another person or a partnership made remittances on your behalf, or
- Had purchased all of another person’s or a partnership’s assets.
- Are a qualifying employer:
- Individuals or partnership
- Tax-exempted from income tax (i.e. non-profit organization, labour organization, etc.)
- Registered charities
- A prescribed organization (i.e. private school, registered journalism, etc.)
- Have experienced a drop in their eligible revenue.
Not only does your revenue and your business need to be eligible but so do your employees and their earnings (salaries, wages, and other taxable benefits), which means:
- Employees employed in Canada, during the claim period, except if there was a period of 14 days or more, consecutively within the period that they did not get any pay from you
- Laid-off employees, rehired, can be eligible retroactively provided that their retro pay and status meet the claim period requirements; they need to be rehired and paid before you can include them in the subsidy
- Severance pay, other benefits like stock options, personal use of a corporate vehicle are not eligible.
- Baseline remuneration, which is what you need to determine the wage subsidy; this is the average weekly eligible remuneration paid during the period of January 1, 2020, and March 15, 2020.
How is the drop in revenue calculated?
Your drop in revenue is compared by calculating the drop in eligible revenue during the crises with revenues prior (baseline revenue) to the application:
Claim period 1 to 4:
- Revenue drop from March to June 2020
- Meet the minimum drop amount for each period to be eligible to claim up to 75% wage subsidy: drop of 155 in the first period, or 30% in the remaining 3 periods.
- You automatically qualify for the next period; you don’t need to recalculate the revenue drop
Claim periods 5 to 9:
- Covers July 5th, 2020 and later
- No minimum revenue drop required to qualify
- The rate of the revenue drop will determine how much subsidy you are qualified for
- Use CRA calculator to determine the subsidy amount or use the spreadsheet
- If your revenue drop is at least 30% (do not round to this number), you will automatically qualify for the 75% rate of subsidy
- If your rate is less than 30% (even if it is 29.99%), you calculate the current and previous period drops. The amount of drop will determine the rate of subsidy.
How to apply for the CEWS?
You can apply for your eligible businesses for the CEWS through:
- Your CRA “My Business Account”,
- Your business representative can apply on their behalf through a “Represent a Client” account, or
- You can use the WebForms application
The Application Process:
Now that you’ve done your due diligence and you (or your representative) are ready with your numbers, here’s a look into what you might see through your CRA My Business account.
Once you log in, you will then find the access in your payroll section, in the RP menu:
From there, you’ll have 3 steps:
- Fill in your account information
- Fill the claim information
- Review your claim
According to the CRA, you can expect your payment within ten (10) business days, if your application is approved, provided you are registered for direct deposit with the CRA (if you are not, set it up now to avoid delays).
How does this impact other benefits, such as TWS or CERB?
For those businesses that may qualify for both the Temporary Wage Subsidy (TWS) and the CEWS, the subsidy received from the TWS will reduce that amount that can be claimed under the CEWS, for the same period.
If an employee is eligible for the Canada Recovery Benefit (CRB), then the employer would not be eligible for the CEWS for that same employee for the 4-week period in question.
Like other government assistance, a subsidy received under this benefit is considered taxable income for the employer.
For more details on income support and other benefits as part of the Federal Government’s Economic Response Plan for COVID-19, click here.
See also our COVID-19: Tax Info Centre, from our TurboTax Support team, answering many FAQs on this topic and more.
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Turbo Tax Canada blog editor and writer.
Susan has been an accounting professional for over 20 years, and has been working with businesses and individuals and their taxes for the past 12. Education is a passion for Susan, and when not writing or talking about tax for TurboTax Canada, she can be found speaking at events, teaching at Mohawk College, and working with many businesses and entrepreneurs through her own accounting advisory practice. Susan is known to be approachable but pulls no punches when it comes to the reality of business finance and taxes.