T1 Filing Issues: Update

In a March 3, 2022 CPA Canada Post (released publicly on March 8), new guidance was provided in respect of claiming certain credits and deductions for items included in Bill C-8 that have not yet received Royal Assent. They include:

Northern Residents Deduction - Taxpayers can file based on proposed legislation without the return processing being delayed by CRA.

Eligible Educator School Supplies Tax Credit - Previously CRA indicated that they cannot process claims based on the proposed legislation until it is passed. CRA has now confirmed that this means that returns including such enhanced claims will be held and not processed until C-8 has passed.

Farmers Tax Credit (returns of carbon tax) - Previously CRA indicated that they cannot process claims based on the proposed legislation until it is passed. CRA has now confirmed that this means that returns including such enhanced claims will be held and not processed until C-8 has passed.

For details on CRA’s original announcement, see this web tip.

Also, comments were provided in respect of the February 4, 2022 proposals for penalties relating to prescribed information returns (such as T4s and T5s) not being filed electronically (if more than 5 of one type of prescribed information return are required to be filed in a calendar year). Although the draft legislation states that the rules would be effective January 1, 2022, penalties on these proposals will not be assessed for returns filed in 2022 since legislation has not yet passed.

Canada Digital Adoption Program

On March 3, 2022 the Canada Digital Adoption Program (CDAP) was launched and opened for application. This $4 billion program provides:

Funding through:

  • Grow Your Business Online Initiative - provides micro-grants and access to e-commerce advisors to help applicants go digital. Businesses must also be registered or incorporated and have at least one employee. For-profit businesses, including co-operatives and social enterprises, are eligible for this $2,400 micro-grant. Businesses must also be registered or incorporated and have at least one employee.

  • Boost Your Business Technology Initiative - provides a grant to help you develop a digital plan, and leverage funded work placements to help applicants with their digital transformation. Eligible businesses must have between 1 and 499 employees and have annual revenue between $500,000 and $100 million. SMEs can apply for a grant to cover 90%, up to a maximum of $15,000, of the cost of developing a digital adoption plan. SMEs will also be able to apply for an interest-free loan of up to $100,000 from the Business Development Bank of Canada.

Resources and Tools in respect of :

  • becoming a digital advisor;

  • an update service;

  • assessing digital maturity;

  • getting cyber certified; and

  • a variety of events and webinars.

CDAP website

Press Release

Backgrounder

CEBA - Tax Treatment

On March 2, 2022 CRA added the following Q & A in respect of CERB to the CEWS FAQ:

6-2.4 Is the CEBA loan taxable to the recipient? New: March 2, 2022

Only the forgivable portion of a CEBA loan is taxable and it is taxable in the year in which the loan is received. For example, if a business received a forgivable portion of $10,000 in 2020, they would include that amount as income for the 2020 tax year, regardless of the year they repaid their CEBA loan.

However, if the forgivable loan is received in respect of an outlay or expense that is made or incurred before the end of the taxation year following the year in which the loan is received, the recipient can elect to:

  • Not include the forgivable loan amount in the income of the year in which the loan is received, and

  • Reduce the outlay or expense deduction by the same amount.

Recipients that make this election must do so via a signed letter accompanying the income tax return for the year the forgivable loan is received or for the year the outlay or expense is made or incurred, whichever is later. For further information on how to elect to reduce the amount of an outlay or expense, see archived Interpretation Bulletin IT-273R2.

If the amount included in income (or not deducted as outlay or expense) is subsequently repaid as a result of a legal obligation to repay the amount, a deduction for the repayment can be obtained for the year in which the repayment is made. For example, if a business was unable to meet the December 31, 2023 deadline, and then later repaid the entire loan (including the forgivable portion) in 2024, they could obtain a deduction equal to the forgivable portion for the 2024 tax year.

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