CRA and CPA help articles
What is the Temporary Wage Subsidy for Employers?
The Temporary Wage Subsidy for Employers is a three-month measure that will allow eligible employers to reduce the amount of payroll deductions required to be remitted to the Canada Revenue Agency (CRA).
Which employers are eligible?
- employers who are a non-profit organization, registered charity, Canadian-controlled private corporation (CCPC), partnership or sole proprietorship;
- have an existing business number and payroll program account with the CRA on March 18, 2020; and
- pay salary, wages, bonuses, or other remuneration to an employee.
Note: CCPCs are only eligible for the subsidy if their taxable capital employed in Canada for the preceding taxation year, calculated on an associated group basis, is less than $15 million.
The Temporary Wage Subsidy for Employers is limited to the eligible employers listed above.
How much is the subsidy?
The subsidy is equal to 10% of the remuneration you pay between March 18, 2020, and June 20, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer.
Associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer.
For example, if you have five employees, the maximum subsidy you can receive is $6,875 ($1,375 x five employees), even though the per employer maximum is $25,000.
How do I calculate the subsidy?
The subsidy must be calculated manually. For example, if you have five employees earning monthly salaries of $4,100 for a total monthly payroll of $20,500, the subsidy would be 10% of $20,500, or $2,050.
Detailed example of how the subsidy is to be applied to an eligible business
Note that numbers below are used for illustrative purposes only and do not reflect actual tax calculations.
Employee Gross Wages $1,000
Income Tax (300)
Net Pay $650
Employer tax liability responsibility at due date (i.e. 15th of month for Monthly Remitter):
Income Taxes (EE) $300
CPP (EE) 30
CPP (ER) 30
EI (EE) 20
EI (ER) 28
Tax liability $408
Less subsidy (10% x $1,000 earnings) (100)
Adjusted Tax liability $308
Given this tax break to the employer, the following journal entry should be entered in product unless changes are auto-reflected:
- Debit - Federal Tax liability $100
- Credit - Income account (use existing, or create new) $100
Steps you can take to track and record this Subsidy in QuickBooks Desktop
There are two main steps required to track the subsidy in-product:
- Manually calculate the subsidy amount by looking at Gross Wage Pay.
- Adjust Liabilities to reduce your Federal tax liability by the subsidy amount.
Remember to enter the calculated subsidy amount as a negative number in the Amount field.
A detailed step-by-step example for illustrative purposes
The following example assumes you are a Monthly tax remitter, where Payroll taxes are due to the CRA on the 15th of each month.
Schedule of 10% subsidy for Monthly Remitter
Mar 18th to Mar 31st (remember to only calculate from Mar 18th to Mar 31st) and due April 15th.
April 1st to April 30th and due May 15th.
May 1st to May 31st and due June 15th.
June 1st to June 20th (remember to only calculate up to June 20th) and due July 15th.
In the example below, we are looking at the following:
- Payroll period: Mar 1st to Mar 31st (only take starting Mar 18th)
- Payroll tax deadline: Apr 15th
Because this new subsidy amount is not calculated in product today you will first need to determine what Gross wages (including taxable benefits) are applicable to the 10% subsidy.
We recommend referencing the Payroll Summary Report to find a summary of the Total Gross Pay (Reports -> Employees & Payroll -> Payroll Summary). This will help you calculate the subsidy amount before making your payment to the CRA (i.e,. 15th of month)
If you open the Payroll Summary Report, set a custom date from 03/18/2020 through 03/31/2020: you will find a summary of the Total Gross Pay by employee. Remember that you’re entitled to 10% of each employee's gross pay up to a maximum of $1,375 per employee or $25,000 per employer. This will also need to be tracked offline to ensure you don’t claim more than these maximums.
For instance, if your total gross pay is $1000, you would be entitled to $100 in Federal Payroll Tax relief on your April 15th filing and payment deadline.
($1000 gross wages x 10% = $100)
Once you’ve identified the tax relief amount, you need to identify the outstanding tax amount owed to the government.
Open Pay Liabilities (select Employees -> Payroll Centre -> Pay Liabilities tab -> Pay Liabilities) and set a custom data range to March 18 to March 31.
You will see a breakdown of the taxes owed on April 15th.
The tax amount with regards to Federal Income tax is what is subject to a subsidy reduction.
Navigate to the Payroll Centre -> Pay Liabilities tab and select Adjust Liabilities.
This will allow you to reduce the Income tax liability by the subsidy amount you are entitled to.
Remember in our example, your gross wages were $1000 in this tax period entitling you to a $100 tax subsidy on those earnings.
To make the reduction in product, enter the appropriate information:
|Date||Date you make this adjustment|
|Effective Date||April 15, 2020 (to match when taxes are due)|
|Adjustment is for||Company|
In the Taxes and Liabilities table:
|Item Name||Federal Income Tax|
|Amount||-100 (make sure to select a negative amount)|
|Memo||Tax subsidy - COVID 19|
Note: make sure you have "Affect liability and expenses account" selected under Accounts Affected. This means it will affect your chart of accounts and change the amounts due showing on your financial statements.
You should now see your entry when you open the Pay Liabilities page again.
This is called a "Tax payment" in product but for this purpose we’re leveraging the feature to reduce your tax liability.
When you go back to your Pay Liabilities page again for Mar 18 - Mar 31, 2020 you’ll now notice that the tax amount due reduced by $100 as desired.
Let’s assume it’s April 15th and you’re ready to make your tax payment to the CRA.
If everything looks acceptable, take note of the adjusted Federal taxes amount. Use these details to make your physical payment to the CRA as you normally would in addition to reviewing your PD7A form (CRA payment options here).