May 26, 2020: Federal Tax Response to COVID-19

May 26, 2020

May 26, 2020: Federal Tax Response to COVID-19

Synopsis
5 Minute Read

TAX UPDATE

Response to COVID-19

May 26, 2020

Update on Extended Tax Filing and Payment Deadlines

Corporations

On May 25th,the Government announced that corporations who would otherwise have a filing deadline in June, July or August 2020 now have until September 1, 2020 to file their income tax returns. This would apply to December 2019, January 2020 and February 2020 taxation years. All related information returns, elections, designations and information requests that need to be filed with the corporate tax return are also extended to September 1, 2020 as long as they are filed and payments are made by September 1, 2020.

As previously announced, any income tax balance due (Part I tax only) on or after March 18 and before September 1 will be due by September 1, 2020. Penalties and interest will not be applied if returns are filed and payments are made by September 1, 2020.

Please note that the previously announced deadline for corporations that would otherwise have a T2 corporate tax filing due date between March 18 and June 1, 2020 remains at June 1, 2020.

Trusts

The Government also announced that trusts having a filing due date in June, July or August 2020 will have an extended deadline to September 1, 2020. A waiver of penalties and interest will be extended to related information returns, elections, designations and information requests that must be filed with a T3 Trust Income Tax and Information Return (T3) provided that they are filed, and payments are made by September 1, 2020 (note that the deadline was not actually extended).

As previously announced, trusts who had a T3 tax filing deadline on March 31, or in April or May 2020, were extended to June 1, 2020. Trust returns with a tax year end date of December 31, 2019 were due on May 1, 2020.

The payment for the current tax year income tax balances and instalments due on or after March 18 and before September 1, 2020, remains extended to September 1, 2020. Penalties and interest will not be applied if returns are filed and payments are made by September 1, 2020.

Self-Employed Individuals

Although the filing deadline for self-employed individuals and their spouse or common-law partner remains unchanged at June 15, 2020, the payment deadline for balances and instalments under Part I of the Income Tax Act due on or after March 18 and before September 1, 2020, was extended to September 1, 2020. The Government

clarified today that penalties (including late-filing penalties) and interest will not be applied if returns are filed and payments are made by September 1, 2020.

Information Returns / Elections / Designations

Information returns, elections, designations and information requests that otherwise have a filing deadline in June, July or August 2020 have been extended to September 1, 2020, provided they are filed, and payments are made by September 1, 2020.

There is some uncertainty surrounding information returns, elections, designations and information requests that have a filing deadline of June 1, 2020 (i.e. other information returns otherwise due after March 18, 2020 and before June 2020). Clarity is required to confirm whether the June 1, 2020 deadline remains or whether a waiver of penalties and interest will be provided if they are filed and payments are made by September 1, 2020.

What Does This Mean?

MNP encourages you and your business to file tax returns on time and avoid last-minute filing where possible for the following reasons:

  • Assist in cash flow management
    • Individuals: planning for deferred payments and instalments, along with other items such as property taxes and mortgages.
    • Businesses: rely on certainty on their impending tax assessments to appropriately plan and budget
  • Refund acceleration:
    • Individuals: it is important to file as soon as possible to expedite any potential refund
    • Businesses: to the extent that you have made instalments for 2020 which may not be required, these can be transferred to 2019 and refunded upon filing
  • Benefits and Credit Payments
    • Individuals: to ensure you are getting the maximum benefit you are eligible for, it is important to file your tax return on time as benefit and credit payments (e.g. Old Age Security Supplement, GST, Canada Child Benefit, Provincial Health Supplements) are calculated using 2019 tax return information and can be impacted if filed late.
  • Avoiding Late Filing Penalties
    • Where taxes are not paid by September 1, 2020, filing by the original extended deadline will avoid a potential late-filing penalty being assessed later.

Government support for Canadian businesses and workers continues to evolve through the COVID-19 pandemic. Should you have questions, contact your MNP Advisor.

This situation is dynamic and government programs can change. To stay up to date and receive insights from our team, visit our COVID-19 Business Advice Centre at MNP.ca/COVID-19. We’re dedicated to supporting Canada’s business leaders by providing timely information and practical solutions for navigating through the uncertainty of COVID-19.

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