Overview
In response to the COVID-19 pandemic last spring, the federal government created two new wage subsidy programs, each with its own complicated set of rules. We feel it important to inform you of the following pandemic-related reporting requirements to Canada Revenue Agency – both for the new support programs and for your 2020 T4 filings.
The first initiative, called the Temporary Wage Subsidy (TWS) Program*, covered the period from March 18 to June 19, 2020. It was made available to eligible small businesses, charities, and not-for-profit organizations with qualifying payroll.
On April 1, 2020, the government introduced a larger, and much more comprehensive, Canada Emergency Wage Subsidy (CEWS) Program. This was available to all eligible employers** with sufficient declines in qualifying revenues.
This past summer, the Canada Revenue Agency (CRA) released a new, mandatory reporting form and related guidance to employers who qualified for the TWS: the PD27, “10% Temporary Wage Subsidy Self-identification Form for Employers” .
If you were eligible to claim both the TWS subsidy and the CEWS, you are required to file this form with the CRA. This is mandatory even if you did not make a claim under the TWS program. This form will be used by the CRA to reconcile your employer payroll program (RP) accounts, since benefits under the TWS program were claimed by a reduction in payroll withholding remittances. Filing this form will ensure that you don’t receive a discrepancy notice at the end of the year.
To enable the CRA to update appropriate payroll program accounts before T4s are filed for 2020, we strongly suggest that Form PD27 be filed as soon as possible!
Requirements of Form PD27
If you are an eligible employer who claimed the TWS, you are required to complete the new 10% Temporary Wage Subsidy Self-identification Form for Employers (Form PD27). If you had more than one payroll program account, a separate form is required for each RP account and the forms must be submitted together. (The combination of such employer accounts must not be more than the maximum subsidy per employee, as well as per employer.)
As well as basic employer information, Form PD27 requires disclosure of the total number of eligible employees paid during the eligible period, as well as gross remuneration, income tax deductions, CPP contributions, and EI premiums. The TWS claimed – in dollars and as a percentage of gross remuneration paid – must also be reported for each pay period that falls within the eligible period. As well, you may request that the CRA pay any remaining subsidy to you, where applicable, for example where the subsidy calculated is more than the income taxes deducted.
Finally, the completed Form PD27 must be attested to and signed by either the employer or authorized officer and submitted online through the CRA’s My Business Account, or mailed/faxed to the CRA National Verification and Collection Centre in the employer’s jurisdiction as listed on the form.
IMPORTANT NOTE on Rate of Subsidy
The employer has the discretion to select a subsidy rate – from 0% up to the maximum of 10% – for each payroll period that falls within the eligible period.
Additional T4 Requirements
As well, all employers will be required to include additional information on each individual T4 slip for 2020, regardless of whether they participated in any of the available wage subsidy programs. There will be additional boxes that will need to be filled out specifying the portion of employment income that was paid within each period (not when it was earned).
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
QuickBooks has stated it is working on including the functionality of the new codes into future software updates.
* Definition of the TWS program
The 10% Temporary Wage Subsidy for Employers (TWS) is a three-month measure that allows eligible employers to reduce the amount of federal, provincial, or territorial income tax they have to remit to the Canada Revenue Agency (CRA). The subsidy is equal to 10% (or a lower percentage the employer elects to claim) on the remuneration paid from March 18 to June 19, 2020, up to $1,375 for each eligible employee. The maximum for each employer is $25,000.
** Definition of an Eligible Employer
To be considered an eligible employer, you must:
have employed one or more eligible employees in the period between March 18, 2020 and June 19, 2020;
have had a registered payroll account (RP account) with the CRA on March 18, 2020; and
Be one of the following types of entities:
an individual (other than a trust)
a not-for profit
a registered charity
a partnership, all of the members of which are an individual, eligible Canadian controlled private corporation (CCPC), registered charity or another eligible partnership
a CCPC with a business limit (relevant for claiming the small business deduction) of more than nil for the last taxation year that ended before March 18, 2020, or if the CCPC does not have a taxation year that ended before March 18, 2020, this condition is applied as if its taxation year ended immediately before March 18, 2020.
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