Making sure the Wage Subsidy is recorded properly is a good way to prevent errors in your books.
QuickBooks is easy to navigate and this makes it easy to record the Wage Subsidy. I encourage you to check out this helpful article here: Temporary Wage Subsidy for Employers (10%). The article goes over the key steps which show you how to properly record the subsidy in your books.
If you need further assistance I also recommend contacting an accounting professional for clarification. If you're not in contact with one, I encourage you to search for one on our website using this link here. Doing this will help prevent any future discrepancies.
Let me know if you need anything else by leaving a comment below. I'll be one message away. :)
Hi there. Thanks for reaching out. I want to make sure you're able to record the Wage Subsidy. I encourage you to check out this article which shows you how to record it in QuickBooks Online: Temporary Wage Subsidy for Employers (10%). Feel free to ask other questions. I'm here to help.
Thank you for responding, James. I actually meant the CEWS (Canadian Emergency Wage Subsidy) payment of 75% eligible wages, not the 10% wage subsidy deducted from payroll taxes. But I've created a Journal Entry in the meantime using the example from the10% wage subsidy, substituting the bank account the CEWS was deposited to vs the payroll account for the 10% wage subsidy and hope that's correct. Looks properly documented as far as I can see but I'll make sure I get our Accountant to check it over as well. Kind regards and stay well.
I've found minimal information regarding this subject. I found one website article that had the following...
Hey cedricverger. Thanks for joining the discussion here in the Community. I know how uncertain these times have been for small business owners like yourself. With new measures taken to assist small businesses, your bookkeeping may need some adjusting for things such as the CEWS (Canada Emergency Wage Subsidy).
Since these calculations take place outside the QuickBooks program, there's no official method released on how to enter this into QBO. This is different from the Temporary Wage Subsidy (10%), where you need to configure things in the program in order to calculate things properly.
If you're in need of any assistance with the CEWS calculations in regards to your bookkeeping, I'd recommend reaching out to an accountant. If you're not yet connected to an accountant in QBO, you can find one in your area here: Find an Accountant.
You should create a new account called "Other Income - Canadian Emergency Wage Subsidy" and post it there. You should also have an account called "Other Income - Temporary Wage Subsidy" for that subsidy, as they are different programs and should be recorded separately. Both subsidies are taxable income. Be careful with the Temporary Wage Subsidy amount as you need to be deducting that from your CRA Payroll Source Deductions payment. You'll need to record an adjusting journal entry to reduce the PD7A payment in your Payroll Taxes module as it won't match up with what comes out of your bank account. Then you can match the reduced Source Deductions payment to your Journal Entry. The CEWS amount is not a deduction of any kind, it's going to come into your bank and should be posted directly to other income.
QuickBooks employees are not accountants or bookkeepers and shouldn't be expected to understand what is essentially an accounting theory question.
Alicia Loewen, Owner
Deximal Accounting Inc.
Thank you Alicia for this information. I have gotten the best information off of YouTube from you in how to apply and handle all the different subsidies. Thank you for taking the time and freely giving out this information!
Hi Deximal Accountant;
I am agree with you. I also added up as other income, could you advise how to show on the payroll or CRA payroll deduction?
We got the subsidies for employee (indirectly), how will show up in the accounting terms?
I did the same thing that Alicia has suggested. But I see a downside to this. Since it is recorded as an income (though it is coming under other income), it will be shown as an income where the claim will be available for the organizations who had a loss in their income (15% for March and 30% for the later months).
Another friend of mine suggested offsetting the payroll account with the grant which I was not happy to do. Because it will show a dip in the expenses which is not true.
The best option would be, having accounts with the name as "Government Grants" under other income and posting the entries to these accounts. So an external/CRA auditor will understand that it is not a regular income and it has to be subtracted when calculating the income for 75% wage subsidy calculation.
My understanding is that we have to include it in our income and it does go towards income when determining the eligibility for the wage subsidy. Have you seen a CRA article that states differently? I have this opinion from my phone conversation with CRA business windows.
You don’t include wage subsidy amounts as revenue for subsequent months! The CRA FAQ states it here: https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-frequently-aske...
It is taxable income though so you will be taxed on it next year though if you claim a profit for your company.
I was wondering if the CEWS is income or decreases expense, since your company is not dedicated to receive subsidies
"Both subsidies are taxable income" is this true?
"If you get a grant or subsidy from a government or government agency, you'll have to report it as income or as a reduction of an expense" from CRA page
My understanding from CRA is that you enter it as income. Either way (whether you put it as increase to income or decrease expenses) the result is that it will ultimately increase your net income which is what you pay taxes on.