6 FAQs About the CEWS & CERB

Beth Graddon

Navigating the complex detail of the emergency pandemic response benefits has been a complex process for businesses and individuals alike. We’re here to clear up some of the frequently asked questions about the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Response Benefit (CERB) and help you sort through sort through the chaotic myriad of the benefits and their tax-audit pitfalls.

1. How is the Canada Emergency Wage Subsidy (CEWS) paid?

Eligible businesses must submit an application through the CRA’s My Business Account portal for each claim period in order to receive their CEWS payment. Businesses registered for direct deposit will receive it within 10 business days of submitting their application. It can also be paid by cheque, but the CRA cautions this will take additional processing time. Businesses expecting a payment of more than $25 million, need to be registered for both direct deposit and for the Large Value Transfer System (LVTS).

2. Can the CEWS be claimed even if revenue reductions are not COVID-19 related?

The short answer is yes. While the federal government has cautioned that the CEWS is intended to help businesses facing a decline in revenues due to COVID-19, it’s technical detail in an FAQ feature on the website that specifies three issues:

Qualfying employer:  To calculate qualifying revenue reductions employers must:

• Have an open payroll program account with the CRA on March 15, 2020
• Have experienced the required reduction in revenue for one or more claim period
• Have made a wage subsidy application for the claim period, in a prescribed form and manner, before October 2020
• The individual who has principal responsibility for the eligible employer's financial activities attests that the application mentioned above is complete and accurate in all material respects.

The “required revenue reduction” and the qualifying periods are shown on the chart below.  Note that the June 6 deadline for period 3 is outdated on the site.  The government extended the CEWS to August 29. More information on the extension “will be coming soon.”

You will note that under the heading, “How is the reduction in revenue determined?” the instructions specifically state:  “. . .the employer is under no obligation to prove that the decline in revenue is related to the COVID-19 crisis.”

Qualifying periods.  Here are the qualifying periods and required revenue reductions:

Deeming rule:   Once an eligible employer has determined that it has experienced the required reduction in revenue for a particular claim period, it is automatically considered to have experienced the required reduction in revenue for the immediately following claim period. 

3. Can CEWS claims made by employers be amended and if so, how?

Beginning June 1, the CRA has said that adjustments or changes to previous applications can be submitted. There are no specific details available on the exact process businesses will need to follow at this time.

4. An employee receiving the CERB is rehired by a company receiving CEWS. Does the CERB need to be repaid?

Since the CEWS can be claimed by employers retroactively to March 15, it’s very possible that rehired employees that were previously laid off will be included in their employers’ CEWS claims. In this case,  it is assumed the employer will pay the wage to the employee retroactively and that the CERB will then need to be repaid by these employees, as no one is eligible to receive income support through both programs for the same time period.

5. Where will the CERB be reported on the 2020 tax return?

The government has not yet confirmed this, however, according to Knowledge Bureau tax expert Walter Harder, RWM, DFA-Tax Services Specialist™, those who received it through the EI system will likely see it on their T4E slip. What we do know for sure at this time is that any CERB payment amounts received will be included in the calculation of Total and  Net Income. This means that it will be used to determine eligibility for credits and benefits, as well as to calculate these amounts. It will also be included as Taxable Income for next year’s tax return, so Canadians should be prepared to give some of their CERB payments back.

6. For the self-employed (proprietors) who claim CERB, are the $1000 and $5000 thresholds based on gross or net income?

The thresholds for any earnings for the traditionally employed or the self-employed are based on gross income.

Bonus question:  Will GST returns for postponed GST payments due June 30 attract late filing penalties?

The government has stated that any GST/HST instalment payments due on or after March 27, 2020, and before June 2020 can be deferred until the end of June 2020. No interest will apply if the instalment payment amounts are paid by this extended deadline. Technically, the government has stated that the deadline for businesses to file their returns remains unchanged and those who are able to are encouraged to file their GST/HST returns on time. However, they’ve also stated that they won’t impose penalties if a return is filed late provided that it is filed by June 30th.

Additional educational resources: Learn more: take the Emergency Pandemic Benefits Response Course online, which includes 9 recorded speaker sessions. You’ll earn 10 CE credits and be well-positioned to provide sound advice for tough times. This course features outstanding, detailed content on the tax and financial planning effects of an unprecedented event that will impact individuals, families and businesses alike today and in the future. The value is priceless: your clients want to know how to access support in their most difficult financial hours. Feel more confident and in-the-know about the government supports – and significant debt and audit risk – your clients might be signing up for.

COPYRIGHT OWNED BY KNOWLEDGE BUREAU INC., 2020.

UNAUTHORIZED REPRODUCTION, IN WHOLE OR IN PART, IS PROHIBITED.