The spread of COVID-19 has forced business owners to assess their business and manage their financial well-being. All business leaders will need to adapt during these unprecedented times. To help you manage cash flow during this challenging time, we will look at recent announcements that will impact you right now.
Corporate and personal income tax payments
The federal government is allowing businesses and individuals to defer income tax payments including instalments—until September 1—as part of its fiscal stimulus package to respond to COVID-19. This deferral applies to corporate and personal income tax that became owing on or after March 18. This means that in the coming weeks and months, you do not need to submit tax balances or tax instalments owing to the CRA until September 1.
Tax filing deadlines
– The tax filing deadline for individuals will now be June 1, extended from April 30.
– The filing deadline for trusts, partnerships, and NR4 Information returns will be May 1.
– The filing deadline for the Registered Charity Information Return, Form T3010, has been extended to December 31, 2020 if the return is due after March 18, 2020.
Federal tax payment updates
– For individuals, the payment of any tax balance owing for 2019 that would have been due on April 30
has been extended until September 1.
– For trusts (other than specified investment flow-through entities), the balance owing for 2019 that would have been due on March 30 has been extended until September 1.
– The June 15 individual instalment payment for 2020 will now not be due until September 1.
– For corporations, all tax payments that become due on or after March 18 (whether it is a balance due or an instalment payment), will not be due until September 1.
– GST/HST remittances will be deferred until June 30.
Two options to maintain higher cash flow for a business:
Save on future instalments by reducing instalments for the balance of the fiscal year, your business can preserve cash. Consider recalculating and submitting instalment payments based on the reduced current year estimated income.
Transfer past instalment overpayments to HST or payroll
If your income tax instalment account already has significantly more than the estimated income taxes for the current taxation year, consider transferring the corporate income tax instalment balances to your payroll and HST remittance accounts.
Wage subsidy – small businesses
– When initially announced, eligible small employers could receive a temporary wage subsidy for three months. The subsidy was said to be equal to 10% of pay during that period, up to a maximum of $1,375 per employee and $25,000 per employer. Recently, a 75% wage subsidy was announced, paying up to $847 per week, per employee, retroactive to March 15, 2020. More details are still to follow so we shall proceed with caution.
– The Canada Emergency Business Account was also announced in late March providing an interest-free loan of $40,000 for qualifying businesses. Up to $10,000 of that amount will be eligible for complete forgiveness if $30,000 is fully repaid on or before December 31, 2022.
These are uncertain times for businesses. You can still effectively manage your taxes by being proactive.
Scott Conner is a partner in BDO’s Huntsvile office, with over 20 years of experience providing corporate and personal tax planning strategies for family-owned businesses, entrepreneurs, and large corporations. He helps his clients with shareholder remuneration strategies, estate planning, as well as business structuring to minimize taxes.