Tax Advice for Businesses that Have Survived the Pandemic

First, if you’re here, congratulations for surviving a very tough year! About one in six businesses considered closing for good this year. We’re not quite out of the woods yet though and are heading into a tough tax season for businesses that have survived the pandemic. Thankfully, you still have options and strategies that can help. Here’s our pandemic tax tips for 2021.

The Canadian Emergency Wage Subsidy (CEWS)

Many businesses took advantage of the CEWS in order to pay their employees and keep their doors open. If you claimed CEWS, then the money that you claimed is considered business income and must be included with your taxes. You also must withhold CPP, income tax and employment insurance premiums from the CEWS that you give to employees.

The CRA is doing mini audits of the CEWS and requesting that some businesses give them information about how they used the relief benefits within 10 days. It’s wise to work with your accountant to have this information available quickly.

The Temporary Wage Subsidy (TWS)

If you were eligible for this tax break the CRA already calculated it and told you. This is not taxable income, instead it is a straight tax break that you will not need to pay taxes on, although you will need to report it.

For Your Employees: Working from Home Tax Deduction

Keeping your employees employed this year was likely tough. While you probably can’t offer them the kind of benefits or bonuses you’d like to, you can at least make them aware of the tax benefits that the government is offering. If your employees are newly working from home, or did for a period of time in 2020, then they may be able to claim a maximum of $400 for their expenses, without having to track them. In most cases you do not need to provide anything for employees to claim this.

Moving Matters

Do all of your employees still live in Ontario? When people began working from home they also moved away from the office. Some may have moved out of province. There can be tax implications to hiring or having an employee who is out of province. This is an important subject to bring up with your accountant.

If your employees moved out of the country, or you chose to hire people who are not residents of Canada to fill gaps or lower your employment costs, then there are even more tax implications that you should discuss with your accountant.

Factoring and Taxes

Do you find that you don’t have the cash on hand to handle your tax obligations? It has been a challenging year, and many businesses are in the same position. Factoring can help you have a healthier cash flow, maintain your savings for your corporate taxes, and save for and pay your employee’s salary more effectively.

Invoice factoring gives you access to your accounts receivables immediately. At J D Factors, we pay you when you send out an invoice and then we handle the payment from your customer. This means that you’ll have a stronger cash flow all year, which is especially helpful come tax time.