Much Needed – Payroll Tax Relief for Eligible Employers – through the TWSE
In response to the COVID-19 crisis and the ensuing economic fall-out the government of Canada introduced the 10% Temporary Wage Subsidy for Employers (TWSE). The goal of the TWSE is to provide much needed financial support to Canadian eligible employers. How? by allowing them to reduce the amount of payroll deductions required to be remitted to the Canada Revenue Agency (CRA).
The details of the TWSE (Temporary Wage Subsidy)
The TWSE is equal to 10% of the remuneration you pay from March 18, 2020 to June 19, 2020, up to $1,375 for each eligible employee to a maximum of $25,000 total per employer. Moreover, you must report the total amount of the TWSE as income in the year in which it is received.
Example of how the Temporary Wage Subsidy works:
You have 10 eligible employee’s that are paid $4,000 monthly for a total monthly payroll of $40,000. Hence, your wage subsidy for the month will be 10% of $40,000, or $4,000.
Assuming for the three-month period your payroll information remains the same in each month and you end up paying $120,000 in remuneration. Then, 10% of the remuneration paid in the three-month period is $12,000. Since this amount is below the maximum allowable amount of $13,750 ($1,375 x 10 employees), your total wage subsidy for the three-month period will be $12,000. If the income taxes you deduct are not sufficient to offset the value of the $12,000 subsidy in a specific period, you can reduce future payroll remittances to benefit from the subsidy. This includes reducing remittances that may fall outside of the application period for the wage subsidy (after June 19, 2020).
Eligible Employers who qualify for the TWSE:
The CRA considers the following as an eligible employer to receive the TWSE:
- Individual (excluding trusts)
- Canadian-controlled private corporation with $15 million or less in annual revenues (including a cooperative corporation)
- Partnership (if their members consist exclusively of individuals (excluding trusts), registered charities, or Canadian-controlled private corporations)
- Non-profit organization
- Registered Charity
Eligible employers need to have an existing business number and payroll program account with the CRA on March 18, 2020 and pay salary, wages, bonuses, or other remuneration to an eligible employee. An eligible employee is defined as an individual who is employed in Canada.