MLD Special Report: Canada’s COVID-19 Response Plan

On March 18, 2020, the Government of Canada announced a variety of tax measures to help Canadians facing hardship as a result of the COVID-19 outbreak. Here’s a quick summary of the major tax changes affecting individuals and small businesses.

Tax payment and filing deadlines

The government announced extensions of the deadlines for filing personal and trust tax returns and
paying balances owing.

Individuals
You now have until June 1, 2020 to file your personal 2019 T1 Income Tax and Benefit Return, which is one month later than the usual April 30th deadline. Self-employed taxpayers (and their spouses or partners) still have until June 15, 2020 to file.

You now have until August 31, 2020 to pay any balance owing for your 2019 tax return, which is four
months later than the usual April 30th deadline. You may have to pay interest on any balance owing
after August 31st for your 2019 tax return.

If you expect to receive income-tested benefits, such as the Goods and Services Tax credit (GSTC) or the Canada Child Benefit (CCB), it is recommended that you still file your tax return by April 30 to help ensure your benefits can be properly calculated in time for 2020-21 program payments that begin in July 2020.

If you are expecting a tax refund, it’s also a good idea to file your tax return as soon as possible since the CRA will continue to process refunds throughout tax season.

Trusts

The government also extended the deadline to file T3 Trust Income Tax Returns, along with Information Slips, to May 1, 2020 for trusts with taxation years ending on December 31, 2019. This includes personal trusts and many mutual fund and other trusts that report investment income on T3
slips. If you had income from a trust in 2019, this may mean you need to wait up to a month longer than usual for your T3 slips to arrive.

Tax instalments

Under the tax rules, quarterly tax instalments (due March 16, June 15, Sept. 15 and Dec. 15) are required for 2020 if your “net tax owing” this year will be more than $3,000 ($1,800 for Quebec tax filers) and was also greater than $3,000 in either 2019 or 2018. The definition of net tax owing is effectively your net federal and provincial taxes, less income tax withheld at source. If are you self-employed, your instalments must include any CPP contributions and voluntary EI premiums.

You now have until August 31, 2020 to pay your March 2020 and June 2020 quarterly personal tax
instalments, and other instalments that would normally be due between March 18 and August 31. No
interest or penalties will accumulate on these amounts during this period.

Temporary income support for workers and parents

For Canadians without paid sick leave who are sick, quarantined or forced to stay home to care for
children, the government introduced a variety of new measures. The first is the waiving of the one-week waiting period for those individuals in imposed quarantine that claim Employment Insurance (EI) sickness benefits and waiving the requirement for a medical certificate for EI sickness benefits.

Secondly, the government is introducing the Emergency Care Benefit (“ECB”), which will provide up to $900 biweekly, for up to 15 weeks. This flat-payment benefit will be administered through the Canada Revenue Agency (CRA) and provide income support to workers (including those who are self-employed), who are quarantined or sick with COVID-19 but do not qualify for EI sickness benefits. It will also be paid to workers (including self-employed), who may be taking care of a family member such as an elderly parent who is sick with COVID-19 but does not qualify for EI sickness benefits. Parents with children who require care or supervision due to school closures, and are unable to earn employment income, will also be eligible for the ECB, regardless of whether they qualify for EI or not.

Application for the ECB will be available in April 2020 and requires applicants to attest that they meet the eligibility requirements. They will need to re-attest every two weeks to reconfirm their eligibility.

You can apply for the ECB using the secure CRA My Account portal, (1) accessing it from the secure My Service Canada Account website, (2) or by calling a toll-free number that will be equipped with an automated application process.

Special one-time payment

The government announced a one-time special payment by early May 2020 through the GSTC, doubling
the maximum annual GSTC payment amounts for the 2019-20 benefit year. The government has estimated an average boost to income for those benefitting from this measure will be approximately $400 for single individuals and nearly $600 for couples. This is estimated to benefit over 12 million low-and modest-income Canadian families.

Increased Canada Child Benefit payments

The government is also increasing the maximum annual CCB payment amounts for the 2019-20 benefit
year by $300 per child. It estimates that the average increase for families receiving the CCB will be approximately $550 on average. These families would receive an extra $300 per child as part of their May 2020 payment. It is estimated that over 3.5 million families with children will benefit.

Student loans

The government announced a six-month interest-free moratorium on the repayment of Canada Student
Loans for all individuals currently in the process of repaying these loans. No interest will be added on these loans for six months.

RRIF minimums

There is no minimal annual withdrawal required from your RRSP. By the end of the year you reach 71,
you must either convert your RRSP to a RRIF to continue the tax deferral, de-register the RRSP and pay the resulting taxes, or purchase a registered annuity.

You must start taking minimum withdrawals from your RRIF in the year after the RRIF is established.
Minimum withdrawals are calculated as a percentage of the fair market value of your RRIF assets at the beginning of the year, and the percentage is based on your age. Withdrawals from your RRSP or RRIF are taxable.

The government announced that for 2020, it is reducing required minimum withdrawals from RRIFs by
25% “in recognition of volatile market conditions and their impact on many seniors’ retirement savings.”

This will provide needed flexibility to seniors that are concerned that they may be required to liquidate more of their RRIF assets than they need to meet the current legislated minimum withdrawal requirements.

Small business owners

Temporary wage subsidy

The government also announced a variety of measures to support small businesses that are facing
revenue losses. To help prevent lay-offs, the government will provide eligible small employers a
temporary wage subsidy for a period of three months. Employers benefitting from this include
corporations eligible for the small business deduction, as well as non-profit organizations and charities. The subsidy is equal to 10% of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration.

Business income taxes

The CRA will allow all businesses to defer, until August 31, 2020, the payment of any income tax
amounts that become owing on or after March 18, 2020 and before September 2020. This relief applies
to tax balances due, as well as corporate income tax instalments. The government made it clear that no arrears interest or penalties will accumulate on these amounts during this period. In addition, the CRA won’t be contacting any small or medium businesses to initiate any post assessment GST/HST or income tax audits for the next four weeks.

Have Questions?

clarson@cgf.com
Chad R. Larson, BA Econ, CIM, FCSI Director Wealth Management, MLD Wealth Management Group

cmayert@cgf.com
Curtis L. Mayert, Director Wealth Management, MLD Wealth Management Group

sderlago@cgf.com
Sue Derlago, CFP, CDFA Vice President, Senior Financial Planner, MLD Wealth Management Group

ckoshman@cgf.com
Christina Koshman, CFP, TEP Senior Tax & Estate Planner, MLD Wealth Management Group