As a result of the COVID-19 pandemic, the majority of payments due to the government on or after March 18, 2020 have been deferred until September 1, 2020. In addition, for individuals and trusts late filing penalties and interest have been put on hold, and will not be charged provided returns are filed and any balance is paid in full prior to September 1, 2020.
The following is a list of certain payments that have been deferred until September 1:
- Personal 2019 T1 tax return balances;
- Personal 2020 T1 tax instalments required for June 15;
- Corporate T2 tax return balances and instalments coming due after March 18 and before September 1;
- Trust T3 tax return balances and instalments coming due after March 18 and before September 1; and
- Most non-income taxes implemented under the province of Ontario (Employer Health Tax (EHT), Tobacco Tax, Insurance premium tax, etc.) coming due on or after April 1, 2020 are deferred until September 1, 2020.
Other available deferrals of payments are as follows:
- GST/HST payments or remittances that became owing on or after March 27, 2020 and before June 2020 are deferred until June 30, 2020; and
- WSIB premiums due on or after March 31, have been deferred until August 31.
We emphasize that relief has been granted in the form of a deferral and the balances and payments are still due. As a result, individuals and businesses should attempt to plan ahead for potentially significant aggregate payments coming due in September in order to avoid late filing penalties or interest.
As noted above, instalment payments are included with the deferral until September 1st for individuals, businesses and trusts. Individuals subject to instalments, will have two instalments due in September (the June 15 instalment deferred until September 1, and the normal September 15 instalment). Businesses and trusts could potentially have more required instalments accumulating during the relief period between March and August.
“Required” instalments, if applicable, are generally calculated based on the income taxes payable in the preceding year. Given many individuals and businesses may be encountering hardships or other challenges that would impact their income, assuming the same amount of taxes payable will be payable for the current taxation year as the previous year, may not be reasonable.
The alternative “current year” method allows you to calculate your tax instalments based on your estimated income for the current tax year. This may significantly vary for the 2020 year and allow you or your business to keep more cash to yourself rather than remitting to CRA. It is important to note that if you use the current year method, and end up remitting insufficient instalments during the year to cover your tax balance, you could be charged interest and penalties. As a result, you should periodically review your expected income for the year and update your instalment payments if necessary, or leave a sufficient “cushion” in your estimates to mitigate the risk of interest or penalties.
Individuals may have received government relief in the form of Employment Insurance or the Canada Emergency Response Benefit (CERB) program. Both of these government support programs are taxable, and should be considered in any calculation of instalments.
Businesses may receive other forms of government relief, such as Temporary Wage Subsidies or Canada Emergency Wage Subsidies (CEWS). We note that these amounts are also considered taxable for the business and any amount received should be factored into instalment calculations.
If you are subject to instalments and have had your income significantly impacted as a result of the current pandemic, we can assist you in calculating instalments based on your current estimated income, in order to reduce your cash outflow that may otherwise come due in September.
If you have any questions relating to this matter, contact your tax professionals at Wilkinson & Co. LLP
This publication is a general discussion of certain tax matters and should not be relied upon as professional advice. If you require tax advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.
This summary deals with proposed matters that are complex and may not apply to particular facts and circumstances. As well, the material and the references contained therein reflect laws and practices which are subject to change. For these reasons, this material should not be relied upon as a substitute for specialized professional advice in connection with any particular matter.
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