March 25, 2020
by DCY Chartered Professional Accountants
We would like to update everyone and provide more clarity on the Government’s Covid-19 benefits, based on information available as of 3:00pm, March 24, 2020.
The benefits that are available are as follows:
EI REGULAR AND SICKNESS BENEFITS
In general, dentists and their family members who are EI exempt will NOT qualify for EI regular or sickness benefits. These benefits are generally for employees who pay into EI.
EMERGENCY CARE AND EMERGENCY SUPPORT BENEFITS
Dentists and their family members who work at the clinic may qualify for the Emergency Care Benefit and Emergency Support Benefit. These benefits will be made available IN APRIL through an online application in CRA’s My Account portal and My Service Canada Account, or by calling a dedicated toll free number (not yet released).
Please register for CRA My Account and My Service Canada Account if you have not already done so.
The Government has announced that those who do not qualify for EI may qualify for these two benefits.
At this point in time details are not yet available, particularly in regards to whether there are other specific criteria that would disqualify dentists and their family members who are EI exempt from qualifying.
TEMPORARY WAGE SUBSIDY
The wage subsidy is being provided immediately for any wages paid between March 18 to June 20, 2020. Almost all professional corporations, hygiene/technical service corporations, sole proprietors and partnerships should qualify for this. This benefit provides you a 10% reduction in wages, up to $1,375 per employee and up to a total of $25,000 per employer.
HOW IT WORKS
If you were to normally pay a staff member $2,000 in gross wages split as follows:
$500 in income tax withholdings, $105 in CPP withholdings, $32 in EI withholdings and $1,363 net pay to the employee.
As the employer, instead of remitting $500 in income tax withholdings, you would remit $300 and keep $200 (10% of $2,000).
The employee still receives $1,363 net pay. You must continue to remit all employee and employer CPP and EI withholdings (i.e. the 10% subsidy cannot be applied against CPP and EI withholdings).
There are calculations which you would need to complete. If you are using a payroll company, please confirm with them that they will take care of these calculations. If you are preparing payroll yourself, then we have prepared a spreadsheet to assist with the calculation. Please feel free to contact us if you require this spreadsheet.
As dental offices are currently closed except for emergency treatment, you may not have any payroll to pay yet and hence would not get any benefits from this subsidy until wages are paid. The subsidy is available for wages paid until June 20, 2020.
This subsidy is subject to tax in the employer’s hands.
FREQUENTLY ASKED QUESTIONS
DOES DENTIST/OWNER AND THEIR FAMILY MEMBERS QUALIFY FOR THIS WAGE SUBSIDY?
We are awaiting more details, however we have not come across any information that would preclude dentists and family member salaries from this wage subsidy. Please note that the subsidy is limited to $1,375 per employee which means paying yourself more than $13,750 from now until June 20, 2020 would not provide any additional benefits.
Paying yourself $250,000 in salaries would not trigger a $25,000 reduction in payroll taxes.
Paying $250,000 in salaries split among 18 employees may trigger up to $25,000 reduction in payroll taxes.
HOW SHOULD I PAY MYSELF RIGHT NOW?
Paying yourself salaries may impact whether you qualify for the Emergency Care/Support Benefits.
If you need cash, you may consider paying yourself a dividend and/or taking a loan (must be repaid within one year of your corporation’s next fiscal year-end) from your corporation to pay for personal living expenses until we receive more details on how the new benefits will be administered.
For more information, visit https://dcy.ca/