News

by Jeff Kirshen

How Does the Canada Revenue Agency Find Unreported Income?

The Canadian tax system operates as a self-reporting system. Each taxpayer is responsible for reporting their total income, deductions and credits claimed to determine their total tax owing. The Taxpayer must file a tax return in order to access benefit programs offered by the federal and provincial/territorial governments.

For more information on the types of income to include in your tax return, click here.

The amount of benefits received will depend on a multitude of factors, which includes the amount of reported income on the taxpayer’s tax return. Taxpayers reporting lower amounts of income may qualify for more benefits than they may normally receive. Thus, verification of information relating to a taxpayer’s tax returns is a critical element of ensuring compliance.

 

How Does the CRA Find Unreported Income?

The CRA searches financial records, real estate records, social media and any other information they can gather looking for unreported income.

The typical way is for them to find unreported income is to intimate an audit where they will review a taxpayer’s books and records to determine if any income is not being reported. However, how does CRA decide who to audit? We will first discuss a typical audit before we explain the various ways that CRA looks for unreported income.

 

Audits

Audits are an essential part of the CRA’s vast range of investigative tools to ensure taxpayers are accurately reporting their income.

A Canada Revenue Agency (CRA) auditor will contact you to start the audit and may provide you with a date, time, and location of the audit. If required, the CRA auditor can enter any premises to examine documents or property of the taxpayer or any other person. If the audit is remote, the auditor may begin by requesting information and documents related to the issue at stake.

The Auditor can examine a range of books and records, documents, and information, including those readily available to the CRA (such as your tax returns and tax information slips).

 

Financial Records

The CRA has access to, and is sent financial records from any financial institution in Canada. These include information about bank accounts, stock holdings and sales, transfers of funds, and cryptocurrency holdings. They are also sent financial information from all over the World through what is known as the Common Reporting Standards.

They then search these financial records and match them up with taxpayer’s tax returns. If the information does not match, an audit will likely be initiated.

 

Real Estate Records

The real estate sector is one of the many sectors that the CRA addresses through audits into real estate dispositions.

The CRA is able to access information in the Land Titles Office to determine changes in names coming on and off titles. They then match up this information to ensure that the sale was reported on tax returns. If no sale was reported, an audit will likely be initiated.

Additionally, if a Taxpayer lives in a home that they cannot reasonably afford based on their income, it is likely that the CRA will initiate an audit to determine how the home could be afforded, assuming that there is unreported income involved.

 

Social Media

The CRA is able to investigate social media postings of taxpayers looking for any lifestyles or assets that do not match filed tax returns. Where they see evidence that a taxpayer owns something outside of their ability to afford, an audit will likely occur.

 

Digital Sales / Gig Economy

For the CRA, the digital economy is worth tens of billions of dollars in potential taxes. The digital economy can be broken down into four categories: the sharing economy (such as AirBNB and Uber), the gig economy (Doordash or Fiverr), peer-to-peer sales (eBay), and social media influencers. Thus, the CRA is forced to innovate their auditing techniques in the face of this large market where unreported income is common.

The CRA receives information from the vast majority of these companies detailing what Canadian taxpayers were paid for their involvement in these economies. If the records received do not match tax returns filed, then an audit will likely commence.

 

Leads from the Public

The CRA regularly receives tips through its Leads Program from members of the public who report suspected tax evaders. Members of the public can anonymously report suspected tax or benefit cheating by providing key information and supporting documents to the CRA.

The CRA will then take steps to verify the lead using the information and documents provided to take the appropriate action to address the specific type of cheating. If they suspect there is unreported income, then they will move forward with an audit.

 

What Happens if I Failed to Report My Income?

If the CRA assesses you for undisclosed income, it would likely result in more than just a tax bill.

You would be subject to interest on the amounts owing. The CRA charges a 5% interest rate compounded daily on overdue income taxes and penalties. The CRA’s interest rates are notorious for compounding tax arrears over a period of years, especially when the reassessment may not be issued until many years after when the debt was originally due.

You may also be hit with various penalties such as  if you knowingly, or under circumstances amounting to gross negligence, made a false statement or omission on your tax return. The penalty for this is the greater of $100 or 50% of the understated tax and/or the overstated credits related to the false statement or omission.

 

What Should I Do If I Have Undisclosed Income?

If you report the undisclosed income before the CRA catches on, then you may seek interest and penalty relief through the Voluntary Disclosures Program. The Voluntary Disclosure Program provides taxpayers with an opportunity to proactively fix errors and omissions in their tax filings before the CRA knows or contacts them about it.

If the individual has already been notified by the CRA regarding the undisclosed income, then an audit will ensue and you will be forced to deal with a CRA auditor.

 

If you have undisclosed income and want to discuss your options, contact us today for a consultation with one of our experts. We are here to help!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions, you should consult a lawyer.

by Jeff Kirshen

An Update to the Non-Resident Speculation Tax

We previously wrote about the Non-Resident Speculation Tax (NRST), explaining what it is, what it is applied to, and any refunds or rebates that may be available. In short, the NRST is the addition of extra taxation to the purchases of real property by foreign nationals.

 

Updates to the Non-Resident Speculation Tax

As of March 30, 2022, the Non-Resident Speculation Tax rate was increased to 20 percent and expanded province-wide. As a result, the NRST may apply on the purchase or acquisition of an interest in residential property located anywhere in Ontario by individuals who are foreign nationals or by foreign corporations or taxable trustees.

The NRST applies to:

• A semi-detached house;
• A detached house;
• Condominium unit;
• Townhouse; and
• Duplexes, triplexes, fourplexes, fiveplexes, sixplexes.

However, the NRST does not apply to land which contains rental multi-residential apartments buildings, commercial land, agricultural land, and industrial land.

The NRST applies to the value of the consideration of the residential property, meaning the purchase price of the transactions. For more information, visit the Ontario Government website.

 

Exemptions from the Non-Resident Speculation Tax

An exemption from NRST may be available in these situations:

• If the foreign national’s spouse is a permanent resident of Canada, he or she can jointly purchase a residence with the spouse. The spouse can also be a nominee or protected person.
• A nominated foreign national under the Ontario Immigrant Nominee Program at the time of purchase can be exempted from the NRST. In this case, the foreign national has certified they will apply or have already applied to become a permanent resident of Canada.
• A protected person can be exempted. A protected person refers to a foreign national who has refugee protection at the time of purchase.

To qualify for an exemption, the foreign national (and if applicable their spouse) must certify they will occupy the property as their principal residence.

The exemption applies if the Canadian citizen, permanent resident of Canada, nominee or protected person and his or her foreign national spouse purchased the property with other individuals who are Canadian citizens, permanent residents of Canada, nominees, or protected persons.

All transferees in the conveyance must also certify that they will occupy the property as their principal residence.

However, keep in mind that the exemption does not apply if the Canadian citizen, permanent resident of Canada, nominee, or protected person and his or her foreign national spouse purchased the property with another foreign national who is not a nominee or protected person.

 

Rebates available for the Non-Resident Speculation Tax

A rebate of NRST may be available for a foreign national who becomes a permanent resident of Canada. To qualify for this rebate, the foreign national must have paid the NRST and:

• become a permanent resident of Canada within four years from the date of the purchase or acquisition,
• hold the property alone or with their spouse (as defined above) only, and
• occupy the property, along with their spouse, if applicable, as their principal residence for the duration of the period that begins within 60 days after the date of purchase and ends when they make an application for the rebate or the rebate conditions have been met, whichever is later.

If the two named transferees are spouses of one another, only one of the spouses must become a permanent resident of Canada for the rebate to apply.

The rebate will not apply if a taxable trustee is a transferee in the conveyance of land.

All rebate applications must be made using the Ontario Land Transfer Tax Refund/Rebate form for NRST.

Supporting documentation will be required to substantiate all applications for rebate.

 

If you are required to pay NRST, or you’re unsure, we can help! Also, if you’re looking to apply for a rebate from the NRST, then call us today to learn more!

 

*Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

Canada’s Luxury Goods Tax

On August 10, 2021, the Government of Canada announced that it would be introducing a new tax on Select Luxury Goods (also known as the Luxury Tax), which was planned to come into effect on January 1, 2022. The Luxury Tax’s purpose was to ensure tax fairness by having those Canadians who could afford to purchase luxury goods pay extra tax on select items that they purchase.

The Luxury Tax applies to deliveries in Canada by way of sale or other arrangements of new luxury cars and aircrafts with a retail price of over $100,000 and new boats over $250,000. The definition of deliveries of goods includes importations of these goods, but does not apply to leases of the same cars, aircrafts, or boats. The Luxury Tax was expected to be calculated according to the following thresholds:

• For boats priced over $250,000, at the lesser of 10% of the total price of the boat and 20% of the total price above 250,000; and
• For vehicles and aircrafts priced over $100,000, at the lesser of 10% of the total price of the vehicle or aircraft, and 20% of the total price above $100,000.

Importantly, the Luxury Tax was expected to not be applicable for transactions occurring between persons that were registered with the Canada Revenue Agency under the new Luxury Tax regime, like manufacturers, wholesalers, and retailers of these selected goods.

The Luxury Tax would, however, be applicable if the select good is delivered within or imported to Canada by a person that is not registered under the Luxury Tax regime, such as consumers that purchase the goods for their personal use and enjoyment. In these cases, the responsibility for paying the Luxury Tax and filing the periodic Luxury Tax return would rest with the registered person that delivers the select good to the non-registered person.

On March 11, 2022, the Department of Finance Canada announced new changes to the Luxury Tax proposal after much consultation with stakeholders. Two new provisions were added to the draft legislative proposals:

• Relief is proposed to be provided to any after-sale improvements that are made to the vehicles, aircrafts, or vessels purchased below the price threshold; and
• Relief is proposed to be expanded for those aircrafts where qualifying flights were conducted in the course of a business with a reasonable expectation of profit.

If Parliament is to approve of these draft legislative proposals, the new Luxury Tax would come into effect on September 1, 2022.

 

If you have questions or concerns about this new Luxury Tax and how it would affect your purchase of select goods, please feel free to contact us! We are here to help.

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

CRA Moving to Electronic Notices of Assessment in 2023

On February 18, 2022, the CRA announced that beginning in 2023, they intend on providing electronic Notice of Assessments and Reassessments for taxpayers. Although it is not clear when they intend on fully transitioning from paper copies of assessments to electronic ones only, the CRA outlined that they will begin the process of switching in the coming year.

In preparation for this change, they announced that both taxpayers who file through NETFILE and EFILE or via paper returns will receive their notice of assessment or reassessment through My Account on the CRA online portal if they provided an email address to the CRA. Those who have not provided an e-mail address will receive the assessments by mail.

Note that first-time filers will receive a notice of assessment by mail regardless of how they filed their first tax return.

As a fraud prevention measure, taxpayers are also now required to provide an e-mail address to access My Account. The CRA claims this will allow them to inform taxpayers “in real time” of changes made to their accounts. In doing so, taxpayers will also be given the option to receive correspondence by paper mail or e-mail when letters by the CRA are issued for taxpayers in their My Account mailbox.

Although there have been some concerns regarding the switch to electronic assessments and reassessments by the CRA, especially for taxpayers who have no access to or cannot operate computers, it does not seem that CRA will be moving to an electronic-only format. The announcement from February 18 implies that taxpayers will have a choice to continue receiving paper copies of their assessments and reassessments if they desire.

With EFILE and NETFILE programs also quickly becoming the norm, it seems that this program can enhance the ability of taxpayers to file their returns and keep records of their assessments. Electronic filers using these services will be able to file tax returns and receive their assessments even if they have mailing addresses outside Canada.

 

If you have any concerns about the Notice of Assessments or Reassessments you’ve received from the CRA, give us a call today! We are here to help.

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

The New 15% Global Minimum Tax Rate for Corporations

The Organization for Economic Cooperation and Development (OECD) has released their long-awaited Pillar Two model rules on December 20, 2021, marking what may be a watershed moment in international tax law. The rules provide detailed guidance to governments on how to levy a global minimum 15% tax rate on Multinational Enterprises (MNE).

To address the growing tax competition and concerns resulting from increased globalization and digitalization, the OECD developed the Global Anti-Base Erosion Rules (GloBE) under Pillar Two of their OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting. These rules were approved in principle by 137 countries in October 2021.

Under GloBE, the global minimum tax rate of 15% will apply to MNEs with revenue over EUR 750 million and will result in an estimated 150 billion USD annually in additional tax revenues around the globe.

GloBE presents two types of domestic tax rules- the income inclusion rule (IIR) and the undertaxed payment rule (UTPR). Together, these rules result in a “top-up tax” that will be applied in any jurisdiction whenever the effective tax rate is below the minimum 15% tax rate for the subsidiaries and permanent institutions of an MNE.

The publication also outlines the definition of MNEs within the scope of the minimum tax and sets out a mechanism for calculating an MNE’s tax rate and top-up tax obligations on a jurisdictional basis.

Additionally, Pillar Two addresses:

• Specific exclusions for certain types of entities such as asset or investment funds for the benefit of excluded entities, and elections to not treat certain establishments as excluded entities;
• Rules for addressing the treatment of acquisitions and certain holding structures; and
• Filing and recording requirements for transactions between different jurisdictions between an MNE group.

However, before these global rules can begin to apply in 2023, members of the Inclusive Framework will need to pass domestic laws in accordance with the Pillar Two model.

 

What this means for Canada

Commentators have noted that the result of the OECD Pillar Two guidelines for Canada is that the revenue that was initially expected to be received under the new global tax for MNEs has been significantly reduced. Under the previously proposed framework, Canadian parent corporations with foreign subsidiaries would owe 15% of the subsidiary’s annual profit less any foreign taxes paid. This would mean that Canada would receive additional tax revenue from any Canadian corporation parent whose foreign subsidiary is in a tax haven. However, under the OECD’s Pillar Two guidelines, tax havens would be able to levy the domestic top-up tax and receive the revenue from the global minimum tax instead. As a result, Canada’s share of the tax pie will be considerably less than expected.

 

If you are questions about your corporation’s taxes, give Rosen Kirshen Tax Law a call today!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions, you should consult a lawyer.

by Jeff Kirshen

CRA Review of Corporate Travel Expenses

The Canada Revenue Agency (the “CRA”) conducts regular reviews of corporate tax returns. As part of a new group project, the CRA is focusing on corporate travel expenses. What does this mean if you claimed travel expenses on your corporate tax returns?

You may be selected for a review to ensure that you have the correct books and records in order to deduct the travel expenses you have claimed. Once selected, the CRA will ask for documentation to support your deductions and explanations how they relate to your business.

 

Travel Expenses

A taxpayer can deduct travel expenses incurred to earn business and professional income. In other words, you can deduct reasonable travel expenses only for travel that relates to your business. Examples of acceptable travel expenses include public transportation fares, hotel accommodations, and meals.

When claiming travel expenses, it is important that you keep all of the related records. While the CRA may accept bank or credit card statements as proof, they normally require the primary receipt to give you the full amount of your deduction claimed. Best practice is to also keep a travel log so that you are able to explain how the travel furthers your business. Without a log, the CRA will be skeptical that your travel was related to your business.

 

What is the CRA Review Process?

If you have been selected for a review, you will get a letter or telephone call from the CRA. The CRA will ask for information, receipts, or documents to support a claim or deduction you made on your tax return.

If you are registered for online mail, the CRA will send you an email notifying you of a letter on your CRA account. You should promptly go to My Account where you can review the letter and begin working on your response.

It is important that you respond and send all the information requested as soon as possible. This will help the CRA review your file quickly. Keep in mind also that these reviews are not full tax audits.

The type of documentation the CRA may request to support travel expenses include:

• a detailed list of the transactions (or the general ledger entries) related to the expenses;
• an explanation of the reason for the travel;
• a copy of the invoices or receipts for the ten largest transactions included in travel expenses for each tax year; and
• a copy of any travel logs.

If the CRA does not receive the supporting documentation, they will disallow the travel deductions.

Normally the letter provides a 30 day deadline for a response. These letters are typically signed by a specific CRA officer, so if you require an extension, you will need to contact that officer to request more time. If you cannot reach the officer, you can always contact the CRA general business line.

 

If you are being reviewed for your travel expenses, or have questions about whether you are eligible to claim travel expenses, give Rosen Kirshen Tax Law a call today!  We can help you navigate this complicated review process. We are here to help!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

Canada Emergency Business Account Extension of Repayment Terms

The Canada Emergency Business Account (CEBA) was an application that was open from April 9, 2020, to June 30, 2021. If granted, it provided small businesses in Canada with a loan at a very favourably interest/repayment rate to support small businesses during the COVID-19 Pandemic. More specifically, CEBA provided interest-free loans of up to $60,000 to small businesses to aid in covering their operating costs during a time where their revenues have been reduced. These loans are also partially forgivable.

 

Canada Emergency Business Account Repayment

If a business applied for CEBA, and received the loan, at some point it will have to repay it. The date of repayment will determine how much of the loan’s principal amount, you will have to pay back.

In general, the repayment terms are as follows:

Interest:

• 0% per annum interest until December 31, 2023.
• 5% per annum interest starting on January 1, 2024; interest payment frequency to be determined by your financial institution.

Repayments & Maturity:

• No principal repayment required before December 31, 2023.
• If loan remains outstanding after December 31, 2023, only interest payments required until full principal is due on December 31, 2025.

If, however, the outstanding principal amount, is repaid by December 31, 2022, some of the remaining principal amount will be forgiven, provided that no default under the loan has occurred. In other words, if you pay the loan back on time, the Government will allow you to pay back less of the loan than you originally owed; a clear incentive for early and/or on-time repayment. Payment before this date will allow a loan forgiveness of up to 33 percent or $20,000.

 

Canada Emergency Business Account Repayment Update

Considering the latest Omicron variant and subsequent lockdown have once again limited a small business’s ability to earn income, the government announced on January 12, that the repayment deadline for CEBA loans to qualify for partial loan forgiveness is being extended from December 31, 2022, to December 31, 2023, for all eligible borrowers in good standing.

The Government did so to support short-term economic recovery and offer greater repayment flexibility to small businesses and not-for-profit organizations, many of which are facing continued challenges due to the pandemic. The terms of the loan repayment remain the exact same as listed above, the only change is the final date when repayment is due (now being December 31, 2023).

Any outstanding loans would subsequently convert to two-year term loans with interest of 5 per cent per annum commencing on January 1, 2024, with the loans fully due by December 31, 2025.

As an example: If you borrowed $40,000: Repaying the outstanding balance of the loan (other than the amount available to be forgiven) on or before December 31, 2023, will result in loan forgiveness of 25 percent (up to $10,000).

As can be seen from the above examples, in order to qualify for the loan forgiveness, you must repay the outstanding balance in full (other than the amount that will be forgiven) by the updated December 31, 2023 deadline.

 

Overall, CEBA has been a great way for the Government to assist small businesses with the financial impact of COVID-19. The repayment terms are rather straightforward, but if they are not complied with, it can have a serious negative impact on a small business. If you have any questions or need any assistance regarding CEBA, or any other government program, or other tax matter, please feel free to contact us today!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

Ontario’s 2022 Staycation Tax Credit

In light of the many COVID-19 travel restrictions implemented by Ontario, the provincial government has introduced a new temporary Staycation Tax Credit for 2022. The tax credit aims to promote tourism within the province and encourage economic activity for hard-hit businesses in Ontario’s hospitality sector.

The tax credit allows residents to claim 20% of the total cost of eligible accommodation booked between January 1^st and December 31, 2022. The maximum amount that can be claimed as a personal income tax credit is 20% of up to $1,000 for individuals and $2,000 for each family. Thus, residents can claim a maximum tax credit of either $200 as an individual or $400 as a family unit.

 

Eligibility

For you to be eligible to claim the Staycation Tax Credit, you must:

• Be an Ontario resident as of December 31, 2022; and
• Must claim the tax credit as an individual or as the only individual claiming on behalf of a family. Only one person per family can claim the credit for the year, however, their claim can include the expenses of their common-law partner, spouse, or eligible children.

Eligible expenses include:

• Accommodation expenses for a leisure stay of less than a month in Ontario between January 1, 2022, and December 31, 2022;
• Single trip or multiple trips cumulatively;
• The portion of a tour package expense that relates only to accommodation;
• The portion of an expense that is necessary to have access to the accommodation;
• The accommodation can be at a short-term accommodation or camping accommodation such as a hotel, motel, bed and breakfast, resort, lodge, cottage, or campground; and
• The accommodation can be booked either directly or through an online accommodation platform provider.

Additionally, the accommodation expense must be paid by you, your spouse, common law partner, or eligible child (note that eligible children cannot claim the credit on their personal income tax return). The accommodation expense must also be subject to GST/HST on a receipt, and must not have been reimbursed to the payor by any person including a friend or employer.

The accommodation expense does not apply to business travel, timeshare agreements, or stays on a boat, train or other self-propelled vehicles.

 

Claiming the Credit

Residents may claim the credit on their personal income tax and benefit return for 2022, regardless of whether they owe taxes for 2022.

To claim the credit, you must ensure that you have detailed receipts for the expenses being claimed. The receipts should include information such as the location of the accommodation, the GST/HST paid, date of the stay, and name of the payor.

 

For individuals who have been contacted by the CRA and are looking for assistance with their tax matter or for other tax law questions specific to you, book a consultation with one of our experienced tax lawyers today. We’re here to help!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions, you should consult a lawyer.

by Jeff Kirshen

The New Canada Recovery Hiring Program

The Federal Government recently announced a new program to assist businesses that have been impacted financially by the Covid-19 pandemic. The Canada Recovery Hiring Program (“CRHP”) offers eligible employers who have experienced a declined in revenue as a result of the pandemic, a subsidy of up to 50 per cent of eligible salary or wages. The goal of the new program is to help businesses increase their hiring and employment practices during a financially difficult time.

Eligible Employers can apply for CRHP support through the Canada Revenue Agency (CRA) for June 6, 2021 (retroactively), through to November 20, 2021.The CRHP will overlap with the Canada Emergency Wage Subsidy (“CEWS”) and eligible employers can choose to claim wage support from either program. Employers can choose the subsidy of whichever program provides them with the greater amount, but they will not be able to use both within the same claim period. CEWS will automatically be applied if both amounts are equal.

 

What is the Difference Between CEWS and CRHP?

The main difference between the two programs is the way that the subsidies are calculated. Please refer to the CRA website for a breakdown of the similarities and differences between the calculation.

 

Who is Eligible?

Most of the eligibility criteria for CRHP and CEWS are the same, including payroll account requirements and required revenue drops.

Most types of employers who are eligible for the CEWS will also be eligible for the CRHP. However, there are some additional requirements for “for-profit” corporations and partnerships to be eligible for the CRHP.

For-profit corporations are eligible only if they are a Canadian-controlled private corporation, and are also eligible for the small business deduction, or are a partnership where at least 50% of interest are help by employers eligible for the CRHP.

You should note that if your employees are eligible for CEWS, then they are also eligible under CRHP. However, employees who were on paid leave are not eligible to be included in the CRHP calculation.

 

How Claim Periods Work

The claim periods for the hiring subsidy match the claim periods for CEWS. Each claim period is a specific period of 4 weeks, beginning on a Sunday.

The subsidy does not renew automatically. Each period, you must confirm that you’re eligible and calculate your amount according to that period’s rules before you apply.

There is a deadline to apply or increase your claim for each period.

 

How to Apply

Unlike CEWS, you only submit one CRHP application for each claim period you are eligible for, even if you have more than one payroll (RP) account. Using the online calculator, you can enter your revenue and employee pay information to see whether your CRHP or CEWS claim would be higher and therefore which subsidy is best to apply for.

There are three ways to apply:

(1) Through your My Business Account, you can find the CRHP application under “Payroll” on the main menu;

(2) Business representatives may apply using the Represent a Client feature. However, note that only representatives authorized at Level 2 or 3 will be able to apply; or

(3)  If you are not able to apply with either of the options mentioned, you can use the Web Forms application by using your web access code (WAC).

 

What Happens After I Apply?

If you are registered for direct deposit, you can expect your payment within 3 to 8 days, and the same for time frame applies for cheques but you also must add mailing time. Each claim period deadline is 180 days after the end of the claim period. There is no availability to change or cancel online yet, however if you need to change from CRHP to CEWS, you can simply submit an application for CEWS that will then replace your CRHP application.

After your application, you will receive a Notice of Determination to know if your claim was accepted, and how much you will receive.

 

If you have any questions or concerns, speak with a tax lawyer to discuss if the CRHP or any other benefits apply to your particular circumstances. Contact us today!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

The Canada Child Benefit and Shared Custody Arrangements

The Canada Child Benefit (or CCB) is a tax-free monthly benefit payment provided to qualifying Canadian families to help with the cost of raising their dependent children.

The CCB is provided to the person who is primarily responsible for raising and caring for the child. Where two individuals who are spouses or common-law partners reside together, it is usually the female parent who is presumed by the CRA to be the person responsible for raising the child and so should be the one applying for CCB. However, in cases where the other partner may be the primary caregiver of the children in the home, they can claim the CCB if they provide a letter from the female parent attesting to the situation.

For same-sex parents, the CRA outlines that only one parent should apply for all the children in the home.

Where the parents of the children are separated, the CRA will consider the custody sharing arrangement to determine which parent is entitled to the CCB.

 

Primary Custody Arrangement

If a child resides with one parent majority of the time, that is more than 60% of the time, and that parent is responsible for caring for and raising the child, then he or she will be entitled to the full amount of the CCB based on their household income.

 

Shared Custody Arrangements

Section 122.6 of the Income Tax Act outlines that shared custody applies to scenarios where the child resides with both parents on a more or less equal basis. A shared custody parent must meet the following requirements:

1. The individual must be one of the two parents of the qualified dependant;
2. The two parents must not be cohabiting spouses or common law partners;
3. The individual and the other parents must reside with the qualified dependent on an equal or near equal basis; and
4. The individual and the other parent must primarily fulfil the responsibility for the care and upbringing of the qualified dependant when residing with them.

If all the above criteria are met, the CRA will provide each parent with 50% of what they would have received if they had full custody of the child, based on respective adjusted family net incomes.

 

Caselaw

However, it is not always clear what the term “equal or near equal basis” means. The Federal Court of Appeal (FCA) has recently provided guidance on the term and delineated what constitutes an equal or near equal basis.

In Lavrineko v. Canada, the FCA determined that the equal or near equal refers to time in a quantitative sense only, and not to any qualitative factors, as opposed to those listed in Income Tax Regulation 6302. The court held that the words “near equal” do not change the overall meaning of the word “equal”, and that it only serves to relieve parents from having to keep very detailed records of every hour that the parent resides with the child. Nonetheless, the time spent with the child, based on a percentage of time spent, should be able to be rounded to 50% and that any percentage that cannot, does not qualify as near equal. Specifically, any percentage between 45% and 49% should be rounded upwards to 50%, while any percentage between 41% and 44% should be rounded downwards to 40%.

The Court in Morrissey v. Canada confirmed the Judge’s analysis in Lavrineko and held that based on the tax court’s initial finding of fact that the parents resided with their child somewhere between a 57.14%/42.86% and 59.38%/40.62% of time, that the percentages could be properly rounded down to 40% of the time. This resulted in a determination that the parents were not in fact “shared custody” parents as defined by section 122.6 of the Income Tax Act.

Contrastingly, in Jersak v. The Queen, the court held that a custody percentage ratio that ranged from 53-47% to 54-46% in the specified years was determined to be a ratio that met the definition of shared custody parents under the Income Tax Act. Both parents were entitled to 50% of the CCB, adjusted based on their respective household incomes.

 

If you are having trouble with determining whether you are considered a shared custody parent under the Income Tax Act or undergoing other difficulties with claiming CCB – Contact us to schedule an appointment with our team of experts. We are here to help!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions, you should consult a lawyer.