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CEWS Reviews by CRA

CEWS audits, FAQs and other COVID-related tax matters

Earlier this week, the CRA and CPA Canada held a webinar where they discussed several new positions and issues with respect to the CEWS audits, FAQs and other COVID-related tax matters.

CEWS audits, FAQs and other COVID-related tax matters

Overall

  • CRA has tried to lift the floor on materiality;
  • CRA will try to be reasonable with time to respond to audit requests; and
  • CRA understands that there may be legitimate confusion out there.

CEWS Reviews

Pre-Payment Reviews

  • Some pre-payment reviews are being conducted without contacting the claimant or representative, but rather by simply checking information that CRA already has on file (e.g., payroll records) to make sure they make sense; and
  • Reviews can be resolved in many cases by just getting a verbal explanation from the applicant with no documentation needed in some cases.

Post-Payment Reviews

Who and What

  • CRA is currently looking at the eligibility of the employer;
    • Whether the qualifying revenue and revenue drop has been calculated correctly;
    • Making sure that employees are actually eligible and not contractors; and
    • Ensuring that the eligible remuneration and baseline remuneration calculations are correct.
  • A cross-section of applicants is currently being reviewed, from small to large multinational, from individuals to partnerships and corporations, from all geographic areas;
  • Those being reviewed may have been identified through risk algorithms, notes from pre-payment reviews, leads, and some are random; and
  • Current audits are focusing on Periods 1 to 6.

The Audit Process

  • Audits will be similar to traditional audits which generally start with a phone call to the applicant. CRA may advise that a computer audit specialist may be used to retrieve electronic records;
  • The phone call will be followed up with a letter detailing the information required. If the initial phone call is not answered, the process will start with the letter, although that is not the preferred method;
  • CRA expects that the audit will be a “two-way conversation”;
  • CRA confirmed that the CEWS letters originally sent out were templates and that they should have been whittled down and customized for the actual audit. It was a symptom of growing pains. Only documentation that is necessary will be requested;
  • If it feels like the information requested is too exhaustive, contact the auditor or team leader. CRA wants to be reasonable and mindful of the realities that the employers are facing;
  • After the initial review, the auditor may request additional information, or expand the period of the audit;
  • Proposal letters will be issued with explanations. Responses can be submitted by the applicant. This will be followed by a notice of Assessment or determination if necessary; and
  • Virtual meetings may be held and email can be used as a last resort.

Published List of Applicants

  • The public “CEWS Employer Search” database is currently being finalized which will show which corporations have received CEWS;
  • Detailed information such as the number of employees of the business or the amount requested cannot be disclosed; and
  • An announcement will be made when it is available for use.

Should you have any questions or feedback, please reach out to myself or the team. As always, we are here to help and support you.

Webinar



Caveat: The information in this publication is current as of the time it was written. This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Deuzeman & Associates to discuss these matters in the context of your particular circumstances. Deuzeman & Associates does not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

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