Coronavirus tax relief: Finally some good news for accountants
Sole practitioners, small firms will benefit most from deadline extensions
TORONTO, March 18, 2020 – Embattled accountants across Canada, struggling to prepare personal and corporate tax returns during the coronavirus (COVID-19) outbreak, received some good news today from the federal government. Prime Minister Justin Trudeau has announced a new set of economic measures to help stabilize the economy, including COVID-19 tax relief, that will extend some tax deadlines. The news comes, however, with a high degree of uncertainty on the status of all tax deadlines that are rapidly approaching.
First the good news. The deadline for filing T1 personal tax returns that were due on April 30, 2020 has been extended to June 1, 2020. Individuals expecting a refund or benefits should file sooner if possible, as the Canada Revenue Agency (CRA) will process refunds. For trusts having a taxation year ending on December 31, 2019, the return filing due date will be deferred until May 1, 2020.
The Canada Revenue Agency will allow all taxpayers to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020. This relief would apply to income tax balances due, as well as instalments and no interest or penalties will accumulate on these amounts during this period.
As relief for Canadian accountants that prepare income tax returns, the CRA will recognize electronic signatures as having met the signature requirements for T183 and T183Corp forms, as a temporary administrative measure, effective immediately.
Relief for sole practitioners, small firms
The extension of the T1 personal tax return deadline will provide significant relief for overwhelmed sole practitioners and small accounting firms. As reported by Canadian Accountant, T1 tax returns are the bread-and-butter of many accounting practices; in a 2018 survey conducted by K2E Canada, eight out of 10 sole practitioners prepared more than 100 T1 returns per year.
The extension of the tax deadline for trusts will firms specializing in trusts and estate administration. While most estate administration tasks have no hard deadlines, estate trustees typically strive to complete all or most of the estate administration within one year of death (to the extent this is possible). The CRA provision of deferring income tax balances due should also provide financial relief to taxpayers facing financial hardship due to personal or business circumstances related to the coronavirus outbreak.
CPA Canada applauds response but flags T2 return deadline
The federal government’s actions and fiscal support were welcomed by Chartered Professional Accountants of Canada (CPA Canada). “Canadians and our business community have been knocked off balance by this virus and it is creating a ripple effect of negative impacts across businesses of all types and sizes,” says Joy Thomas, President and CEO of CPA Canada.
“The government’s response is swift and decisive, providing significant measures to help alleviate the serious financial challenges faced by our business community and to support employees and families in these unprecedented times. The magnitude of the response, three per cent of GDP, is strong — stronger than many other nations.”
CPA Canada noted the government’s $27 billion in direct support to Canadian workers and businesses as well as the $55 billion to meet liquidity needs via income tax deferrals. “The COVID-19 crisis is creating stress and economic consequences requiring real-time business decisions. Many Canadian CPAs will be deeply involved managing relevant aspects of the emergency package and helping organizations ensure business continuity.”
Despite requests made by CPA Canada, however, the government has not provided any information regarding the deadline for corporate tax returns, which are due near-term. While many sole practitioners and small firms prepare corporate tax returns, they lack of guidance around the T2 deadline is affecting Canadian accounting firms. (Canadian Accountant is preparing an article on this.)
There was also no mention made on relief for GST/HST for businesses. CPA Canada says that a key concern is that businesses that continue to operate will have to collect and remit HST/GST but may not be paid immediately by their customers, or at all in the case of bad debts. This could create significant cash flow issues.
CPA Canada has stated that it “will continue to discuss issues of concern with the CRA with a goal of providing more clarity, and in particular, whether extensions can be provided for other key tax deadlines that are approaching. We do believe from our discussions with CRA that relief will be provided for returns and other filings and we will continue to ask for more clarity.”
The CRA has asked employees who perform “non-critical” services to stay at home for the next three weeks to help minimize the spread of COVID-19. CRA call centres will operate at reduced capacity but will continue to respond to incoming calls at call centres across Canada.