Canada Emergency Business Account (CEBA) is a loan program announced by the government of Canada to support small businesses in meeting their operational needs. You can find more information about this program from your bank. Your bank is the only source of information for you.
We have an influx of calls from small business owners, especially owner-managers or self-employed individuals who are in need of real help. There are requirements set by the Government of Canada and some entrepreneurs and small business owners rightly feel that they find themselves excluded. We do not intend to express any political opinion here.
One of the key requirements of CEBA is to have T4 information return with Box 14 having an amount between $20,000 and $1,500,000. If you do not have this, you are not eligible! Yes, you are not eligible. In order to get CEBA, a lot of entrepreneurs are calling us to do their taxes. When the conversation flows through it reaches a point where they are trying to find a solution to file a T4 Information return for them.
Can I file a T4 Information Return for last year (2019) to get CEBA Loan?
Answer: You should file late T4 only if you had paid employees in 2019. If you did not, you should not! Just filing a T4 to get CEBA loan may get your loan application approved, however, may run you into some other troubles. Late filing of T4 will come up with some penalties as well.
- Late filing penalty for T4: The deadline for filing T4 for 2019 was March 01, 2019. Canada Revenue Agency charges a penalty of $10 per day for not filing a T4 on time. Details about these penalties can be found here.
- Penalties and Interest on Source deductions: Last payroll remittance for 2019 was supposed to be sent on January 15, 2020. Late remittances have even higher penalties. You can find the information about these penalties by following this link.
Example of Penalty and Interest:
Let’s suppose you want to pay yourself a salary of $20,000 ($1,667 per month) for 2019 to meet the requirement. The first penalty for not remitting source deductions will be approximately $282 being 10% of the amount not remitted ($2,824.44 of remittances). The second penalty will be late filing for T4 information return. Let’s assume you file it with a 60 days delay from the original due date of March 01, 2020. Late filing penalty will be $10 x 60 days = $600.
Now, if you do not have a payroll account (RP Account) you need to call Canada Revenue Agency to get the one. While registering you for the payroll account, they are going to ask when is the first date you are going to pay salaries? So if your answer was in 2019, expect a remark on your record. If you, later on, change your mind, keep it in mind you have provided this information yourself so do not get shocked if you ever get a review or an audit.
I pay myself from my Corporation, why did not I get T4 from my Accountant?
When times are tough, a lot of us try to hold onto something and find an excuse for our own doings. So a lot of fellow accountants have expressed to me that their clients are expressing a shock that they did not get T4 whereas they got paid $XXX,XXX from their corporations.
T4 is issued where payroll deductions are done from these payments. However, many small business owners prefer not to pay CPP on these payments and decide to take dividends from their corporations instead. The dividend is not a salary, read here more. This is always smart to create a mix of salary and dividends.
So, if you got paid by dividends from your corporation and no salary, you cannot have T4 for yourself. If dividends are issued, you should have been issued T5 and the requirement is T4.
I paid more than $20,000 to contractors, am I eligible for CEBA?
No, payments to independent contractors are not eligible for CEBA loans. Only payments to employees where you made payroll deductions and then remitted by adding your contributions to CRA make you eligible for CEBA. Payments to contractors go on T4A whereas payments to employees go on T4.
I am not a corporation, can I have CEBA Loan?
Yes, if you have issued T4 for your employees. Before you ask the next question, an owner cannot issue T4 to himself/herself for an unincorporated business.
Where can I get more information on CEBA loan?
By calling your bank. Your bank is the best and only source of information for CEBA. Sometimes your bank says to contact your accountant and file your taxes. That’s quite normal. If you are looking for a workaround because your bank told you to get the taxes done from your accountant, we suggest going back to the first question again.
My business is impacted by COVID-19 what are my options?
This post is for information purposes. We have experienced a high volume of calls for corporate income tax services in the past few weeks. Most of the time business owners are looking for the above answers and workaround. Maroof HS CPA Professional Corporation provides a comprehensive range of income tax services for both corporations and individuals in Canada. If you would like to do your corporate income taxes or personal income taxes, we welcome all the new clients to experience excellence in accounting and tax services offered in Canada. We tried to answer the questions you might have for T4s above to help you make the right decision.