2021 T4 Income Tax and CPP Remittance

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In the course of preparing the 2021 financial statements for your organization, you may recall that it was necessary to declare management salaries in addition to any salaries or wages you may have paid to regular employees.

If you have not made any payroll remittances for 2021 for your management salaries, please contact Ryan Lore at the email address or phone number listed below.  If required, we recommend a nominal payment be made to The Receiver General of Canada by January 10, 2022. The remittances should be made to your company’s payroll “RP” account.  They will be incorporated into your 2021 T4 slips.

If you plan to remit only a nominal amount of income tax, you should be aware that CRA now places a heightened emphasis on assessing interest on the difference between the tax actually paid and the theoretical amount to be remitted according to the Canada Revenue Agency’s published withholding guides.  Consequently, in today’s tax environment, it is preferable to make regular monthly remittances throughout the year, rather than a single payment once a year (whether nominal or otherwise).  Please contact us if you require further assistance on this matter.

In order for Lohn Caulder LLP to prepare your 2021 T4s, we will require the necessary information by no later than the end of January 2022.  This information would include a summary of your calendar-year payroll records.  The filing deadline for T4s is February 28, 2022 and it is your responsibility to ensure that this filing deadline is met to avoid penalties.

Electronic filing of T4s is now mandatory. Therefore, once we have received and processed your information, we will electronically file the T4 Information Returns to the CRA. The copies which you later receive from us will be strictly for your own files, and your employees if applicable.

Mr. Ryan Lore of our office is in charge of T4s – please contact him if you have any questions.  Ryan’s email is rlore@lohncaulder.com, and his direct dial telephone is 604-408-3079.

Thank you in advance for your assistance and cooperation!

2021 T3 Trust Tax Returns

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What’s New with Trusts in 2021?

For 2021 and subsequent tax years, Budget 2018 proposed a new reporting obligation that requires express trusts to report the identity of all trustees, beneficiaries, and settlors of the trust. These changes are being made to improve the collection of ownership information to help Canada Revenue Agency assess the tax liability for trusts and its beneficiaries.

As a consequence, clients with existing trusts must fill out a form to submit this
information to Canada Revenue Agency. We have created a disclosure form to help summarize the information needed. This disclosure form can be downloaded at: https://www.lohncaulder.com/checklists. Completed forms should be sent to Lilian Tseng at ltseng@lohncaulder.com. Of course, if we prepare the individual tax returns of all the trustees, beneficiaries, and settlors of the trust, then we would already have this information.

2021 T3 Trust Tax Returns

We are writing to remind you that it will soon be time to file your family trust tax return for 2021. All family trusts must report their income and disbursement activity for the 2021 calendar year by no later than March 31, 2022.

This deadline is applicable to all family trusts, and there are penalties for failing to file on time.

For family trusts that hold private corporation shares, the practical deadline is actually much earlier: February 28, 2022. This is because corporations must report any dividends paid on such shares on T5 slips, and these T5s must be filed by the end of February. Quite often, the cash-flow through trusts “drives” the quantum of dividends that the corporation has to report, and there is sometimes a bit of bookkeeping involved.

With a deadline this tight, we need your help!

To get so much done in such a short period of time, while keeping your accounting fees to a minimum, we ask that you please summarize the following for us:

  1. The amount of cash paid into the trust for each month of calendar 2021.
  2. The amount of cash paid out from the trust to each of the beneficiaries for those months.

To assist you in reporting such information to us, we have prepared a transaction summary form for you to fill in and send back to us.

The transaction summary can be downloaded at: https://www.lohncaulder.com/checklists

An Excel spreadsheet version is provided, which allows you to enter data, and have the sums automatically done for you. Alternatively, a PDF version is available if you would like to fill out the form manually.

Once completed, you can return the form to us by one of the following options:

  1. Return e-mail (please send to ltseng@lohncaulder.com);
  2. Over the Internet, to our secure web portal. Please go to the ‘Portal’ link on the front page of our website https://www.lohncaulder.com/, or contact portal@lohncaulder.com for invitation access to Portal;
  3. Fax (604-688-7228); or
  4. Mail

If you are unable to prepare the transaction summary, please send us your January-to- December 2021 trust bank statements and cancelled cheques, so that we can prepare the summary for you. For these situations, it will also be necessary to identify for us the particular beneficiary for whom a payment to a third party was made.

We will compare your transaction summary to the information in your corporate records, and will optimize the allocation of the income of the trust into one of two categories:

  1. New 2021 calendar dividends or other payments, and, if applicable,
  2. Tax-free distribution of capital from previous years.

Lilian Tseng of our office is in charge of T5s and T3s—please contact her if you have any questions. Lilian’s email is ltseng@lohncaulder.com, and her direct dial telephone is 604-699-3361.

Thank you in advance for your help!

Land Owner Transparency Act

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In May 2019 the BC provincial government passed the Land Owner Transparency Act (LOTA), which created the Land Owner Transparency Registry.  This registry records the beneficial landowner of all real estate interest in British Columbia.  A beneficial landowner is an individual or entity who owns or controls real estate indirectly, such as through a corporation, partnership, or trust.  Often this is seen where an individual is on title owning a property in a fiduciary capacity by way of a trust that is beneficially owned by a corporation.

The LOTA requires these entities who hold an interest in real estate located in BC to file a Land Owner Transparency Report by November 30, 2021.  Many of our clients hold properties in these entities.  As such, they will all need to complete this report by the deadline.

On November 2, 2021, the government extended the filing deadline for the report for pre-existing owners to November 30, 2022.  This extension only applies to pre-existing owners of prescribed interests in real estate who owned their interest on or before November 30, 2020.  All purchasers of land after that date, who otherwise have an obligation to file, still have a November 30, 2021 deadline.

Why should you care?  The maximum penalty is the greater of the following:

  • $25,000 for individuals or $50,000 for a person other than an individual (e.g. relevant corporation); or
  • 15% of the assessed value of the property

Additional information about the LOTA, forms, and filing requirements can be found at www.landtransparency.ca

Please contact your lawyer or notary to assist you with making the appropriate filings before the due date of November 30, 2022.

CSRS 4200: Impacts of a New Compilation Standard

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A change to CPA standards will soon impact on the scope of work we do for many of you.

This change, which has been years in the making, updates the rules for preparing and presenting certain types of financial statements.  The goal is to make “Notice to Reader” style financial statements more meaningful – both to you as the business owner, and to whoever else ends up viewing them.

All CPA firms will have to adopt the new standards for fiscal years ending December 14, 2021 and beyond.

Lohn Caulder is planning for a seamless transition to the new standard.  Clients should only notice small changes – a slightly altered look to your financial statements, and being asked a few additional questions each year.  A brief summary of these changes follows.

What is Changing?

Financial Statements

The new standards shouldn’t change the numbers on your financial statements, but they will add additional context.  The changes can be found in 2 primary areas:

  • Compilation Engagement Report: This is the new name for the “Notice to Reader” report found on page 3 of your statements. It will be quite a bit longer than what you are used to seeing.  Most notably, it now describes the responsibilities of both management and practitioner.  You can see an example of a the new wording on page 5 of the CPA Canada briefing
  • Basis of Accounting Note: The “Basis of accounting” note will describe the accounting method used in your business (most commonly: cash basis, accrual basis, or a mixture of the two). Many of business owners won’t know how to describe their ‘basis of accounting’, so we will help.  But please keep this in mind: you will be asked to acknowledge responsibility for the basis of accounting, so please ask as many questions as you need to!
Other Changes

In practical terms, implementing the new standard means we, the accountants, will be collecting more information from you, the business owners.  Please bear with us if we ask more questions than usual.  Some typical questions include:

  1. Enquires about the intended and expected users of your financial statements.
  2. Discussions about the methods of accounting you use.
  3. Asking you to sign Engagement and Management Representation letters before releasing the financial statements.
  4. Filling in gaps in our knowledge of your business. This could include things such as the number of people you employee, additions to your product line, or changes to your corporate structure.

For anyone who really wants to dig in we recommend this summary from CPA Canada: Compilation Engagements Management Briefing.  Or, as always, give us a call or send us an email.

CERS: The New Subsidy for Renters AND Owners

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We aren’t the first to say this, but things sure are changing fast these days!  Back in August (which feels like years ago now!), we wrote about Canada’s covid-related subsidies in a newsletter titled “CEWS in the News”.  Since then, every single subsidy we covered has been tweaked, extended, updated, or otherwise nixed

Today’s newsletter focuses on a subsidy that didn’t exist back in August.  We are going to talk about a new, significant addition to Canada’s covid relief program that we want to be sure every client of ours is aware of: the Canada Emergency Rent Subsidy, or “CERS”

For those who haven’t heard of it yet (it was just announced in October), CERS is a federal subsidy that assists businesses with their monthly property costs.  CERS is available to virtually all Canadian businesses, non-profits, and charities – to both renters and property owners – who have seen a drop in monthly revenues.  The subsidy runs in 4 week periods, starting with September 27 to October 24th, and continues through to June 2021.  At this point there is very little deadline pressure – CRA says they will start processing applications on November 30th, and continue to accept new applications for up to 6 months after the end of each period.

So how much is this subsidy worth?  The answer is, as usual, it depends!  CERS only funds a portion of your eligible property costs.  The important questions are: Which costs are eligible? and What portion of these costs can be claimed?

1. Which property costs are eligible for CERS?

If you are a renter, this includes most costs you are required to pay under a lease agreement, up to $75,000 per claim period. Think: base rent (excluding GST!), property taxes, insurance, and certain customary operating costs.

If you own your business property (which excludes homes), eligible costs may include property taxes, insurance, and interest on your mortgage, not to exceed $75,000 per claim period.

2. What portion of your costs can be claimed?

The portion of your costs that qualify for subsidy are tied to declining monthly revenues.

  • Revenue drops of 70% or more qualify for the maximum subsidy – 65%
  • Revenue drops over 50% and below 70% qualify for a subsidy between 40% and 65% (the calculation for this tier of subsidy is a bit too complicated for a newsletter!)
  • Revenue drops under 50% qualify for a subsidy equal to 80% of their revenue drop (for example, if revenues dropped 20%, your subsidy is 16%)

There is a final tier of subsidy we hope none of you find yourself in.  If any of you are in an industry that has been temporarily shut down due to a mandatory public health order, you qualify for the base subsidy plus a 25% top-up.  This bumps the maximum claim up to 90%.

Of course, this information is all high-level, and businesses will need to look at their eligibility on a case-by-case basis. If you think you might qualify, or have any questions about CERS or other subsidy programs, we are here to help!

Introducing “Portal”

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With winter fast approaching and 2020 almost in the rear-view mirror (finally!), we here at Lohn Caulder are marking the changing season with a big change of our own. We are very excited to announce the launch our new cloud document platform, simply called “PORTAL”.

Over the next few weeks, we will be creating a unique and secure Portal space for every one of our clients. Be on the lookout for an email invitation coming later this week (please check your spam folder if you don’t see it). We would like each and every one of you to register as soon as possible! Setup is truly quick and painless.

Your Portal will become the primary secure way to both send and receive documents with us. When your tax material is ready to send to the accountants, just upload it to Portal and we get a notification telling us it’s there. When your financial statements and tax documents are ready, we upload them to Portal and you get the notification.

Further, each client Portal is designed to double as a library of your Lohn Caulder documents. Going forward, you will be able to easily access things like tax returns and financial statements from anywhere with an internet connection.

Further still (!), the Lohn Caulder Portal is compatible with DocuSign, the first electronic signature platform accepted by the Canada Revenue Agency. We will be able to upload documents for you to sign with your mouse, your finger, even a saved signature file. No more printing, signing, scanning, and re-emailing documents!

Of course, most of you do already send and receive digital documents by email. While we have never experienced an email hack (knock on wood), we listen very attentively to the online security experts. We want to be sure your personal information is as safe as it can be. With Portal, we are partnering with CCH Wolters Kluwer, a firm with massive amounts of experience in cyberspace security. Hopefully this helps us all sleep just a little better at night.

We have put a tremendous amount of thought into how to best serve our clients in these fast-changing times.  We are confident that Portal will provide the necessary security and convenience to allow us to continue to provide you with the best possible service.

If you have any questions about the Portal you can always call us at 604-687-5444 or send an email to portal@lohncaulder.com.

CEWS in the News

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Have you applied for the CEBA, CEWS, and TWS?

The CEBA application is due August 31, 2020!

If your business has suffered any decline in revenue, you can now qualify for “CEWS 2.0.”

To aid Canadian employers during COVID-19, the Canada Emergency Business Account (CEBA); the Canada Emergency Wage Subsidy (CEWS); and the Temporary Wage Subsidy (TWS) are programs we encourage everyone who thinks they might qualify to contact us for further details.

CANADA EMERGENCY BUSINESS ACCOUNT (CEBA)
The CEBA provides a $40,000 loan that is interest-free until December 31, 2022, and $10,000 of the principal could be forgiven if a minimum of $30,000 has been repaid by December 31, 2022.

The loan is available to Canadian operating businesses with 2019 gross payroll between $20,000 and $1,500,000, or Canadian operating businesses that have filed a 2018 and 2019 tax return and have eligible non-deferrable expenses – such as rent, property taxes, utilities, and insurance— between $40,000 and $1,500,000

If you think you qualify please contact us or your corporate financial institution to apply for this loan.  The deadline to apply is August 31!

CANADA EMERGENCY WAGE SUBSIDY (CEWS)
CEWS for Periods 1 to 4 (March 15 to July 4, 2020)
The CEWS program is a payroll subsidy for employers that suffered a decline in revenue of at least 15% in March 2020, and 30% in any of April, May, and/or June 2020. The revenue decline is based on comparison to the revenue in the same month in 2019 or the average revenue of January and February 2020.

CEWS for Periods 5 and Onwards (after July 5, 2020 – “CEWS 2.0”)
The CEWS program has been extended to at least November 21, 2020, and has moved away from an all-or-nothing approach, so that eligible employers with any decline in revenue will qualify.

The base subsidy will be available to eligible employers that experience any decline in revenue, and the subsidy amount will be dependent on the extent of the revenue decline when comparing the revenue of the reference month to either (1) the revenue of the same month in 2019, or (2) the average revenue for January and February 2020.

A top-up subsidy will be available to eligible employers that experience a decline in revenue exceeding 50% when comparing the average revenue in the preceding 3 months to either (1) the average revenue in the same 3 months in 2019, or (2) the average revenue in January and February 2020.

The reference periods used to compare the revenue decline percentages for both the base subsidy and top-up subsidy must be consistent throughout periods 5 to 9.

CEWS Application
Applications for claim period 5 (July 5 to August 1) will open on August 17, 2020.

Retroactive claims for any of the periods 1 through 4 can be made now.

To proceed with the application, or if you have questions, please contact Andy Li at ali@lohncaulder.com.

10% Temporary Wage Subsidy (TWS)
Most businesses with existing payroll accounts and regular salaries will qualify for the TWS even if they did not meet the revenue decline tests required for the CEWS.

The 10% TWS is a 3-month measure that allows eligible employers to claim a subsidy equal to 10% of the remuneration paid form March 18 to June 19, 2020, up to a maximum of $1,375 for each eligible employee and $25,000 for each eligible employer.

Reporting for the TWS is now available.

*   *    *    *    *    *    *    *    *    *   *    *

Please visit our Covid-19 resource page on our website:

http://www.lohncaulder.com/covid-19/

Business Owners & COVID-19: What You Should Know

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Our managing partner of Lohn Caulder LLP , Jason Nakano, has teamed up with Bruce Lindsay and Shane McMahon from OceanFront Wealth to speak about investment opportunities and tax subsidies related to COVID-19.

If you are a business owner and curious what your options are during COVID-19 please watch this presentation:

For further details about the Canadian COVID-19 subsidies available, please check out our dedicated page by clicking here.