Last updated: Oct. 8, 2021
Last year was different. The federal government introduced several support programs to help employers cope with the impacts of the pandemic.
As a result, the Canada Revenue Agency (CRA) has their work cut out for them when it comes to validating payments for support programs.
It doesn’t just affect them – as an employer, you’ll have to be mindful of the tax implications of COVID-19 programs, and deal with new reporting requirements. Your 2020 tax returns could look a little different this year.
What’s new for the 2020 tax year?
The Canada Revenue Agency (CRA) introduced additional requirements for the T4 slip, Statement of Remuneration Paid. This change will help them validate payments made under 3 major COVID-19 support programs:
- The Canada Emergency Wage Subsidy (CEWS)
- The Canada Emergency Response Benefit CERB)
- The Canada Emergency Response Benefit (CESB)
For the 2020 tax year only, all Canadian employers will be required to report employment and retroactive payments on T4 slips in 4 specific periods, using the following new information codes:
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
Note that each period relates to the day you paid your employee(s), and not necessarily the period of work the payment covered.
Here’s an example. Let’s say you’re reporting employment income for the period of April 25 to May 8, and you paid your employee(s) on May 14. Make sure you report that payment using code 58 (May 10 – July 4).
While the codes above are a new requirement, you will still have to report employment income in Box 14 using Code 71.
We recommend working with a tax professional or payroll provider to help you navigate these changes and ensure you’re filling out T4s correctly.
New form for the temporary wage subsidy (TWS)
The temporary wage subsidy (TWS) was a short-lived program that reduced the amount of payroll deductions employers were required to remit to the CRA for a 3-month period (from March 18 to June 19, 2020).
This was a program for employers who didn’t qualify for the CEWS or had already started their payroll remittances prior to the CEWS being introduced.
The subsidy was equal to 10% of remuneration paid up to certain limits, and the reduction only applied to income tax withheld but not CPP and EI, which was to be remitted in full.
If you took advantage of the TWS, it reduces amounts available under the CEWS subsidy by 10%.
The CRA introduced the 10% Temporary Wage Subsidy Self-Identification Form for Employers to help them verify if employers who qualified for both programs did choose to claim the TWS.
The CRA has asked employers to fill out and submit this form if you are eligible to take advantage of the TWS and:
- You already reduced your remittances
- You intend to reduce your remittances (the form will help you calculate your eligible TWS amount)
- You claimed the CEWS and, as a result, need to confirm on Form PD27 the amount of the TWS you are taking advantage of (refer to Line F of your CEWS application)
FBC Payroll
Worried about complying with the new T4 requirements? If you join FBC as a Member, we offer an add-on payroll service. Through FBC Payroll, we’ll prepare your year-end T4s and Records of Employment, ensure you stay compliant with CRA guidelines, and handle all the paperwork so you can focus on bigger things, like your own success. To learn more, book an appointment online.
