[Canada] COVID-19 Ten-percent Temporary Wage Subsidy for Employers

This article outlines the Temporary Wage Subsidy for Employers that has been released by the Canadian Revenue Agency (CRA) amid the COVID-19 outbreak and how to use Wave to apply this subsidy to your payroll. Note that this is different from the Canadian Emergency Wage Subsidy.

For information on the Canadian Emergency Wage Subsidy (CEWS) and how it interacts with the ten-percent Temporary Wage Subsidy for Employers, please visit:

 

Update August 4, 2020: The CRA has released Form PD27, 10% Temporary Wage Subsidy Self-Identification Form for Employers that all eligible employers must submit if receiving this subsidy, the Canada Emergency Wage Subsidy (CEWS) or both. For more information, please see:

 

Here are some quick links:

How do I know if I’m an eligible employer for the Temporary Wage Subsidy?

How will Wave help me with the subsidy?

How does Wave calculate my subsidy amount?

What if my subsidy from a pay period exceeds the income taxes from the same period?

How do I report this subsidy to the CRA?

How is the subsidy bookkept in Wave?

How do I know how much subsidy has been applied for a specific period?

How will this affect my employees?

What if I’m eligible but didn’t opt-in right away in Wave?

What if I'm eligible but haven't used this subsidy program - or stopped ahead of June 19, 2020? 

What if I said I was eligible in Wave but now I know I am not?

Is the subsidy considered taxable income for my business?

What if I don’t pay any wages between March 18 - June 19, 2020?

What if I was using this subsidy but am now eligible for the Canada Emergency Wage Subsidy? 

How do I know if I’m an eligible employer for the Temporary Wage Subsidy?

The Canadian Revenue Agency's FAQ outlines the eligibility requirements as:

"You are an eligible employer if you:

  • are a(n):
    • individual (excluding trusts),
    • partnership (see note below),
    • non-profit organization,
    • registered charity, or
    • Canadian-controlled private corporation (including a cooperative corporation) eligible for the small business deduction;
  • 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 an individual who is employed in Canada.

Partnerships are only eligible for the subsidy if their members consist exclusively of individuals (excluding trusts), registered charities, or Canadian-controlled private corporations (CCPCs) eligible for the small business deduction.

CCPCs are only eligible for the subsidy if they have a business limit for their last taxation year that ended before March 18, 2020, greater than nil (determined without reference to the passive income business limit reduction). For more information on whether your CCPC would have a business limit, see Small Business Deduction in the T2 Corporation Income Tax Guide.

For more information on whether your corporation is a CCPC, see Type of Corporation."

How will Wave help me with the subsidy?

If you are eligible for the subsidy, you will be able to mark your business as such within your Wave Payroll account. To do so, go to the Payroll menu on the left-hand side:

  1. Click COVID-19 
  2. Click Claim Employee Retention Credit 

If you are using automatic tax payments (remittances) with Wave, Wave will calculate your subsidy per payroll and automatically deduct this amount from your withdrawal and next remittance.

If you are handling your remittances outside of Wave, Wave will still calculate your subsidy per payroll, and you will be able to follow the CRA’s instructions on how to make your remittances.

Once marked as eligible, you will see the subsidy amount in your Payroll Summary when you review and approve your next payroll.

On the same COVID-19 page, once the subsidy is active, you will see the amount that has been applied increase as you approve payrolls within your account.

How does Wave calculate my subsidy amount?

Wave will calculate your maximum subsidy as it is prescribed by the CRA:
“The subsidy is equal to 10% of the remuneration you pay between March 18, 2020, and June 19, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer.”

Following the CRA guidelines, the calculation will take place as follows:

  1. Wave will take the total amount of gross wages paid to each employee on a pay date that falls within the period of March 18 - June 19, 2020 and multiply this amount by ten percent.
  2. The result of the Step 1 is then deducted from the total amount of income tax (federal/provincial/territorial) you are required to remit to the CRA from the payroll.

When you approve your payroll, you will see the subsidy amount in your Payroll Summary with the line item “CRA Temporary Payroll Subsidy for Employers.” You will see the subsidy appear on the Employer Portion of the Summary as this only affects the employer remittance, but do note that it will only be deducted from the income tax portion of the remittance - your Canada Pension Plan (CPP) contribution and Employment Insurance (EI) premiums will not be affected.

Wave will continue to calculate your subsidy amount until one of the following happens first:

  • you have reached the limit of either $1,375 per employee paid within the prescribed time frame; or
  • you have reached $25,000 per employer

Please note that payroll remittances are not subject to the tax deferral as part of the measures to help support those affected by the COVID-19 outbreak. You must continue remitting payroll deductions by your remittance due date.

What if my subsidy from a pay period exceeds the income taxes from the same period?

You may run into a situation where your subsidy amount is greater than the amount of income taxes withheld in a specific pay period. In this case, you are allowed to reduce future remittances to account for the value of your subsidy, even if it is past June 19, 2020.

If you are on automatic tax payments and this situation occurs, Wave will continue to reduce your remittances until you have received the full value of your subsidy based on the wages paid with March 18 - June 19, 2020.

If you are not on automatic tax payments and this situation occurs, Wave will continue to reduce your tax liabilities until you have received the full value of your subsidy based on the wages paid with March 18 - June 19, 2020.

How do I report this subsidy to the CRA?

You will need to keep information to support your subsidy calculation. This includes:

  • the total remuneration paid from March 18, 2020 to June 19, 2020;
  • the federal, provincial, or territorial income tax that was deducted from that remuneration;
  • Canada Pension Plan contributions (CPP) and Employment Insurance premiums (EI) deducted from the remuneration paid; and
  • the number of eligible employees employed in that period.

To report the subsidy, you will be required to complete Form PD27, 10% Temporary Wage Subsidy Self-Identification Form for Employers. If you have multiple CRA payroll program accounts, you will have to do this for each individual account. The CRA will then use the information on this form to reconcile the subsidy with your payroll program account.
You can submit this form either through your CRA-My Business Account, via mail, or by fax.

The CRA has listed different scenarios in their reporting guidelines to help you fill the form out appropriately.

Please note that all eligible employers, whether you received this subsidy, CEWS, or both, must fill out Form PD27, 10% Temporary Wage Subsidy Self-Identification Form for Employers. If you claimed neither subsidy, you need not submit this form.

If you have a credit in your payroll program account after the subsidy is applied and your account is reconciled, the CRA will pay the amount to you or transfer it to your next year’s remittance.

For more information on submitting Form PD27, check out our Help Centre article:

How is the subsidy bookkept in Wave?

To help keep track of the subsidy amount you've received, Wave will record all subsidy amounts that you claim on your remittances as "Uncategorized Income." You can add a new Other Income account to your Chart of Accounts called Wage subsidy income and categorize all subsidy amounts there for clearer bookkeeping.

How do I know how much subsidy has been applied for a specific period?

You will be able to see your total subsidy amount or your subsidy amount for a specific period by viewing your Payroll Wage & Tax Report. 

You can access your Payroll Wage & Tax Report by using the left-hand menu:

  1. Click Reports
  2. Click Payroll Wage & Tax Report
  3. Choose the dates for which you wish to see a report. This can be either the current quarter, previous quarter or specified dates (for example, March 15, 2020 - April 11, 2020).
  4. Click Generate Report

You will see your subsidy amount reflected in the Employer Summary portion of the report on the bottom line. 

How will this affect my employees?

This will have no effect on your employees as you are not withholding less tax from your employees.
You are to continue to pay your employees and make payroll deductions (federal and provincial/territorial income tax, CPP contributions, EI premiums) from their pay as you would normally.

At year end, your T4 summary and slips will report employee wages and remittance amounts as normal.

The subsidy deduction only affects the remittance amount you are to send to the CRA from pay dates within the prescribed period of time.

What if I’m eligible but didn’t opt-in right away in Wave?

Once you select that you are eligible, Wave will look to see if you have any pay period dates on or after March 18 to see if any adjustments need to be made. If you do, Wave will retroactively calculate your subsidy from these past dates and apply it to future remittances.

If you are eligible, using automatic tax payments, already had approved pay dates prior to this subsidy feature and do not intend on running any future payrolls, please contact support to have your current remittance updated. 

What if I'm eligible but haven't used this subsidy program - or stopped ahead of June 19, 2020? 

Eligible employers who did not reduce their remittances must complete Form PD27, 10% Temporary Wage Subsidy Self-Identification Form for Employers to allow the CRA to credit your payroll program account by the amount of the subsidy for which you are eligible.

If you elected for the 10% Temporary Wage Subsidy for Employers to be equal to a lower percentage than the total wages paid during the eligibility period, you must indicate on your self-identification form that you reduced your remittances by a lower amount than you had been entitled. This includes if you were eligible for this subsidy but only applied the remittance deduction for part of the claim period (between March 18 - June 19, 2020).
If you fail to do so, you will be credited for the entire 10% subsidy and your CEWS claim may be reduced and recovered if necessary.

If you have a credit in your payroll program account after the subsidy is applied and your account is reconciled, the CRA will pay the amount to you or transfer it to your next year’s remittance.

What if I said I was eligible in Wave but now I know I am not?

Please contact support right away to let us know to turn the subsidy off and correct any remittance amount in a timely fashion.

If you are deemed to not have been eligible at a later date and had reduced your remittances, the CRA will assess you for the income tax that you deducted from your employees’ pay but did not remit. This assessment may include penalties and interest.

Is the subsidy considered taxable income for my business?

Yes. It is very important to maintain a record of the subsidy amount as you will be required to report it as income in the tax year it is received.

What if I don’t pay any wages between March 18 - June 19, 2020?

If you don’t pay any wages, including bonuses, between March 18 - June 19, 2020, you can not receive the subsidy.

What if I was using this subsidy but am now eligible for the Canada Emergency Wage Subsidy? 

From the CRA's webpage on the Canada Emergency Wage Subsidy:

"For employers that are eligible for both the Canada Emergency Wage Subsidy and the 10 per cent wage subsidy for a period, any benefit from the 10 per cent wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the Canada Emergency Wage Subsidy in that same period."

This means that you can continue to use this subsidy at the same time as the new Canada Emergency Wage Subsidy. You will have to account for the ten-percent subsidy being applied in order to not over-claim the new 75 percent subsidy. 
For an overview on the Canada Emergency Wage Subsidy by Wave, please see Canada Emergency Wage Subsidy .

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