When your startup gets ready to hire for the first time, new costs tend to crop up pretty quickly. First, there’s the cost of recruiting and interviewing, and then there are the fees for processing government paperwork, not to mention you need to purchase any equipment the new recruits needs to do their job. The list of expenses goes on. What’s not as obvious during the hiring process are the opportunities you have to save money along the way.
Many entrepreneurs are in the dark about a prime tax break opportunity you can take advantage of when it’s time to hire your company’s first employees. Called the Hiring Credit for Small Business (HCSB), this tax break provides a way for your small business to save up to $1,000 on employment insurance (EI) premiums.
The federal government created the HCSB in 2011 as a temporary tax credit to lighten the employer’s share of EI premiums. The credit was extended in 2012. As part of its 2013 Economic Action Plan, the government announced it was extending and expanding the credit for another year. This deduction became part of the Employment Insurance Act and continues for the 2018 tax year.
When she announced the HCSB in 2013, Gail Shea, Minister of National Revenue, commented that, “Our Government recognizes that the success of our country’s small business community is critical to creating jobs and driving economic growth. Our low-tax approach allows small business owners to focus more on expanding to create new jobs, and less on their tax bill.”
The HCSB tax credit is great news for small businesses —but only if they know about it. More business owners can take advantage of this credit by understanding exactly what’s being offered.
Why is the HCSB of Value to Small Businesses?
Employment Insurance premiums aren’t cheap for any business. The HCSB tax credit is an incentive for your business to save money while helping to improve the Canadian economy and lower the unemployment rate at the same time.
An estimated 560,000 small businesses can benefit from the HCSB, which allowed those employers to reinvest approximately $225 million in 2013. The credit also helps your small business ease some of the costs of hiring new staff, making it easier to build out teams and hire top talent to help your business grow and thrive.
One small business owner who has taken advantage of the HCSB is Peter Nahas, owner of Mezza Lebanese Kitchen in Dartmouth, NS. He comments, “I’ve been working hard to expand my business to the four locations we have today, and the Hiring Credit for Small Business has made it easier for me to bring on the new staff that we need. It’s great to see the government supporting small businesses like mine.”
How Does the HCSB Work?
The HCSB is for employers and businesses like yours that pay the employees’ share of EI premiums to a payroll (RP) account. Under the program, the Canada Revenue Agency (CRA) provides a credit up to $1,000 on a payroll account if an employer’s EI premiums show an increase over the previous year. The amount of the credit is determined by the difference between the EI premiums you paid in 2017 and 2018.
For example, if your portion of EI premiums paid in 2017 was $2,300, and in 2018, you hired new employees and paid employer EI premiums of $3,000, you are eligible for a credit of $700.
Who Is Eligible?
To qualify for the credit, you need to meet all of the following criteria:
- You deducted EI premiums from your employees and remitted the premiums to your payroll (RP) account
- Your total employer EI premiums paid in 2017 were $15,000 or less
- Your total employer EI premiums increased in 2018
- You reported the income and deductions on a T4 slip and filed this on your RP account for 2017 and 2018
Even if your business just launched this year, you can benefit from the credit. If you meet all of the conditions listed above, the CRA uses a zero value for your 2017 employer’s share of EI premiums when it calculates the amount of the credit you are eligible to receive for 2018.
How Do You Apply?
One of the best parts about the HCSB is that there are no applications for your company to fill out. Simply complete your T4 slips and submit them on time, and the CRA automatically calculates the credit for you and applies it to your payroll account.
This is where using a payroll software tool like QuickBooks is helpful in running the numbers and calculating earnings, taxes, and deductions,so you can say on top of any cost-savings opportunities.
You knew when you started your own business that you’d need to pay taxes as your company thrived. But you don’t want to pay money than you need to, and this is why finding all available deductions is essential to your bottom line. To find those deductions, you need to track all of your expenses and the reason why you incurred them. QuickBooks Online can help you maximize your tax deductions. Keep more of what you earn today.