Updated April 3, 2020
Short answer, it depends. Let’s clear up what the Temporary Wage Subsidy is about first, and then how it impacts all of us, if at all. Also, this is a separate program from the Canada Emergency Wage Subsidy, announced on March 27th, 2020. For details on CEWS, click HERE.
What is the Temporary Wage Subsidy (TWS)?
This is a 3-month subsidy, provided to qualifying businesses, calculated on their remuneration (such as salaries or wages) paid to employees between March 18, 2020 and June 20, 2020. The subsidy is equivalent to 10% of their remuneration paid up to a maximum of $1,375 per employee, to a maximum of $25,000 for each employer. These amounts were announced in the Economic Response Plan, but formal regulations have yet to be released.
The subsidy is for remittances on the income tax portion that you would be submitting to the CRA, not CPP or EI, that was withheld from the employee. The amount withheld from the employee does not change, rather the employer can reduce the amount of income tax source deductions they have to remit to the CRA, by the subsidy amount, for the stated period.
As a business you must keep in mind that this subsidy is taxable income for you. If your subsidy ends up being $2,000 that you now don’t have to remit to the CRA, this is now reported in your bookkeeping as income, and will be taxed on your next return filing.
Additional filing requirements, such as to account for the subsidy when generating T4s in February 2021, have yet to be implemented.
Individual tax payer (employee):
This wage subsidy will not impact you at this time based on the information provided. Even though the federal government is providing this subsidy to qualifying businesses, one where you might be employed, it actually does not impact the taxes that are being withheld from your pay cheque. Those will continue as they’ve always done and you will receive your T4 in February 2021 for your wages and appropriate deductions.
Self-employed individual, partnerships, or individuals (other than a trust):
Originally when the first announcements came out about the subsidy, sole-proprietorships or partnerships with employees were not included as eligible employers; they have now been included within the legislation. These businesses can utilize the subsidy on their employees’ income tax remittances, but not on monies paid to the proprietor or partner, as they are not an employee of their unincorporated business.
Corporations, most Canadian-controlled private corporations:
CCPCs are eligible if for their most recent tax year, ending prior to March 18, 2020, they had a business limit greater than nil (for purposes of qualifying for the small business deduction); their taxable capital employed in Canada is less than $15 Million.
Other business types:
Registered charities and non-profit organizations, may also qualify for the TWS.
All businesses handle the TWS in the same way in terms of calculation and remitting. Be sure to track your subsidy amounts to ensure to do not exceed the limits and are prepared for the 2021 T4 summary calculations.
For more details on wage subsidy and other benefits as part of the Federal Government’s Emergency 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.
Accounting educator, business strategist, and advisor.
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.