Canada Emergency Business Account (CEBA) interest-free loans
The Canada Emergency Business Account (CEBA) provides interest-free, partially forgivable loans of up to $60,000 to small businesses and not-for-profits that have experienced diminished revenues due to COVID-19 but face ongoing non-deferrable costs such as rent, utilities, insurance, taxes, and wages.
We have recently expanded CEBA to include an additional interest-free $20,000 loan, 50% of which would be forgivable if repaid by December 31, 2022.
This means the additional loan effectively increases CEBA loans from the existing $40,000 to $60,000 for eligible businesses, of which a total of $20,000 will be forgiven if the balance of the loan is repaid by December 31, 2022.
Business owners can apply for support until March 31, 2021, through their banks and credit unions.
Canada Recovery Benefits (CRB)
The CRB provides $500 per week, for up to 26 weeks, for workers who have stopped working or had their income reduced by at least 50% due to COVID-19 and who are not eligible for Employment Insurance (EI).
Canada Recovery Sickness Benefit (CRSB) The CRSB provides $500 per week for up to a maximum of two weeks, for workers who:
Are unable to work for at least 50% of the week because they contracted COVID-19.
Are self-isolated for reasons related to COVID-19.
Have underlying conditions, are undergoing treatments, or have contracted other sicknesses that, in the opinion of a medical practitioner, nurse practitioner, person in authority, government, or public health authority, would make them more susceptible to COVID-19.
Canada Recovery Caregiving Benefit (CRCB) The CRCB provides $500 per week, for up to 26 weeks per household for workers:
Unable to work for at least 50% of the week because they must care for a child under the age of 12 or family member because schools, day-cares, or care facilities are closed due to COVID-19.
Because the child or family member is sick and/or required to quarantine or is at high risk of serious health implications because of COVID-19.
This is a great time of year to revisit life business and personal goals. What is your ideal life?
What do you want to achieve in life?
I dare you to dream big, because there is no limit to what you can do when you set your mind to it. Right now, I want you to imagine your ideal life. Picture every single detail as vividly as you can. Now, I am not talking about wishful thinking here. I do not want you just to imagine how your life would look like if you could do anything you want. Your ideal life needs to become your life goals. It needs to be something you will strive towards with an action plan and a timeline. This is how you turn dreams into reality. Therefore, setting your life goals is vital to success. Every individual/small business will face challenges. Unfortunately, not everyone will rise above them. They well get overwhelmed by hardship and throw in the towel.
Motivation is key.
Whenever you feel that you cannot go any further, just revisit that picture of your ideal life. Act as if it was already your reality. This way, you will gather the strength you need to get out there and achieve it. Now, as you go about building your ideal future, life will get in the way. For this reason, your goals must be as precise as possible with an action plan. The best way to set those goals is by creating a ‘bucket list’. Split your list between business and personal goals. Think about the things you would like to do next year. What are some achievable goals that will get you closer to the life you want to live? These can be business and personal goals that will contribute to the life you want to live. Once you have those goals in place, write them down, and make your bucket list. Set your priorities. Your bucket list should contain your life’s biggest goals for the long run. Of course, goals without actions are nothing but wishes. An action plan and a timeline are very important.
You can deduct expenses for the business use of a work space in your home, as long as you meet one of the following conditions:
It is your principal place of business; or
You use it on a regular and ongoing basis to meet your clients or customers
You can deduct part of your home expenses such as utilities, home insurance, maintenance expenses, property taxes, and mortgage interest. To calculate the part you can deduct, take the area of your workspace divided by the total area of your home.
Since the corporation probably does not own your home, charge the corporation a rental fee equal to the above annual home expenses.
The corporation rental fee and home expenses must be reported on your personal taxes based on the ownership of the home. Since the corporation rental fee equals the home expenses the impact on your personal taxes is zero.
Your corporation is a separate legal entity and as such, creditors or legal actions are against the corporation and its assets, not your personal assets. The shareholders of a corporation have limited liability. Please note shareholders can be legally liable for the corporation’s GST/HST and payroll taxes.
If you don’t need all the corporation earnings for personal income, you can leave them in the corporation, deferring personal taxes on withdrawals and possibly enjoying a 15% preferred tax rate on the first $500,000 of profit in a CCPC.
Your corporation has tax flexibility from which you may personally benefit. If you sell shares in your Canadian-controlled private corporation (CCPC) capital gains will be tax–free up to $848,252.
The administration costs are more expensive with a corporation than with a partnership or a sole proprietorship. Administration costs include incorporation costs, annual financial statements, and annual corporate income tax return.
Losses in an incorporated business can’t be personally claimed.
Take out profits using a mix of salary and dividends to maximize your tax savings. The best combination depends on your income level, the corporation’s income level, your cash flow needs and other factors.
If you loaned funds to your corporation, you can receive any amount of repayment on these loans tax free.
Salary paid to a family member:
Tax savings may be available if a salary is paid to a family member for work performed and the family member is in a lower tax bracket than the corporation.
If your corporation was originally funded with a substantial amount of capital, you may also be able to withdraw funds tax-free by reducing the corporation’s paid-up capital — (i.e. the amount of capital contributed to the corporation in exchange for its shares). Generally, you’re allowed to pay shareholders any amount less than the corporation’s paid-up capital without tax consequences, where you also reduce the paid-up capital by that amount.
Capital Dividend Account:
When a private corporation realizes a capital gain, the untaxed portion (one half of the gain) is added to its capital dividend account. The corporation can pay any amount from this account to its shareholders without paying personal tax, as long as you make the appropriate tax elections and file the directors’ resolutions with the Canada Revenue Agency.
If the corporation has realized any capital gains (excluding any realized losses, which reduce the amount of the account), you should look at having it pay out capital dividends. The paid out capital dividends cannot be reduced by subsequent capital losses.
Form T2125, Statement of Business or Professional Activities on your personal income tax form must be completed. A separate form must be completed for each business or professional activity you operate if you have two or more of either. The Statement of Business or Professional Activities are reported based on a calendar fiscal year; hence the Year-end is December 31st.
What income amounts should be reported?
Your income includes all the revenue received for the goods and services you provided. The income you report is less than the amount of GST/HST that is collected if you are registered for GST/HST.
What expenses amounts should be reported?
Deduct any reasonable current expense you incur to earn business or professional income. The expenses you can deduct include any GST/HST you incur on these expenses minus the amount of any input tax credit claimed. Please note you cannot deduct personal expenses, only the business part of your expenses can be claimed on the Form T2125 Statement of Business or Professional Activities. In addition, you cannot claim the expenses you incur to buy the capital property.
What is the accrual method?
In most cases, self-employed individuals report their income using the accrual method of accounting. With this method, you report your income in the fiscal period you earn it, regardless of when you receive the income; and deduct expenses in the fiscal period you incur them, whether you paid them in that period or not. Incur usually means you either paid or will have to pay the expense. Income from professional activities is business income. Therefore, you report it using the accrual method.
A budget is a planning tool necessary for building a framework for your business and finances. Budgets provide a detailed view of business assets, realistic revenue expectations, and how income matches against the anticipated expenses to ensure the business is profitable.
Budgets also assist in setting goals, allocating resources, and establishing priorities.
Budgets are necessary for evaluating the performance of your business over the fiscal year.
Part of budgeting is tracking actual revenue and expenses against the budget. This ensures that your business sticks to its plan. It also identifies any problems and opportunities for the business.
Salary employees can deduct pension contributions, union dues, and professional fees, but they are very restricted in what employment expenses they can claim. Unlike individuals who run their own business, there is no general rule allowing employees to deduct any reasonable expense incurred to earn employment income. If Employees are required to pay their own expenses, they can only deduct these expenses for tax purposes if their employer has signed a T2200 Form called a Declaration of Conditions of Employment allowing the employee to deduct specific expenses.
If their employer’s Declaration of Conditions of Employment allows, what other employment expenses are tax-deductible?
Allowable motor vehicle expenses (including capital cost allowance)
Long-distance telephone call
Cell phone air time (part of)
Your assistant’s salary
Work-space-in-the-home expenses: You can deduct the part of your costs that relates to your workspace, such as the cost of electricity, heating, and maintenance. However, you cannot deduct mortgage interest, property taxes, home insurance, or capital cost allowance.
Benchmarking can be used by businesses in practically any industry to compare Key Performance Indicators and performance measurements to industry standards. The comparisons can be made in a wide variety of different areas: financials, productivity, costs, overhead, turnaround time, customer satisfaction and retention, safety, and employee retention, to name just a few.