July 20, 2020
Receiving the OHIP COVID-19 Advance Payment Program? Here’s How to Avoid Accidentally Paying Income Tax On This Loan
As an Ontario-based physician, podiatrist, optometrist or hospital-based dentist, here’s how to benefit from the COVID-19 Advance Payment Program 1, and avoid accidentally paying income tax on this loan.
For starters, what is the COVID-19 Advance Payment Program?
“Recognizing that physicians are essential partners in the fight against COVID-19, the Ministry of Health has established an advance payment program to provide payments to eligible physicians to address any cash flow issues that may arise during the COVID-19 outbreak 2”.
If your 2020 billings have been less than 70% of your 2019 billings, then “top-up” loan payments will be (or already have been) automatically deposited into your account. Since eligible health professionals are automatically enrolled in this program, the main decision you have to make is whether to repay this loan early or not. Here are a few important points to consider.
1. Remember: A Loan is NOT Income.
Any contributions you have received from the COVID-19 Advance Payment Program are loan payments, NOT income. As such, they should NOT be included as part of your taxable income. But here’s the tricky part: Loans and OHIP remittances will appear in the same deposit column of your bank statement.
Why should you care? Because loan deposits received could easily be mistaken as income by your accountant. It is critical, therefore, that you draw attention to these deposits to avoid paying extra income tax.
2. Keep Your Accountant Informed.
Have you received any funding under this program? If your accountant hasn’t already asked you this question, you should both flag it to her/him and delve into the answer.
To start, make sure that your accountant knows that monthly, interest-free, automated advance payments will be electronically deposited.
To identify these payments on your monthly Remittance Advice (RA) report from OHIP, look for line items described as EMERG ADVANCE PAYMENT (COVID19).
Then, be sure to inform your accountant of the amounts you have received. The easiest way to do this is by providing your accountant with remittance vouchers now or before completing your practice’s year-end.
How Loan Payments Work
Some additional details about the COVID-19 Advance Payment Program loan payments that you should share with your accountant.
- Will be calculated based on the monthly average of the previous 12 months (April 1, 2019 to March 31, 2020).
- Will automatically top up your monthly payment to 70% of this average.
- Will have already landed in health professionals’ accounts in May, June and July 2020 (MoH Info Bulletin, April 2020).
*Important To Note* Terms and Conditions
- Advance payment repayment will be withdrawn from your future OHIP payments.
- Between November 2020 and March 2021, repayment sums will be withdrawn in 5 equal installments against future OHIP payments.
- Loans received under this program are interest-free (MoH Info Bulletin, April 2020).
3. Make Sure These Loans Are Not Included in Your Office Overhead Costs
If you are charged a percentage of your monthly OHIP billings as office overhead, these loan receipts should NOT be counted towards your monthly billing. Tell your office administrator that these payments are NOT to be included in the calculation of monthly overhead charges.
A friendly side note from an accountant who cares: Be sure to keep an eye on your monthly overhead charges, to make sure they are being calculated accurately.
4. Want our Advice? Take the Money!
Why? For those who have received the loans, there are rumours that some or all of this government funding will be forgiven. For those not wishing to keep the loan money in their bank accounts, the Ministry of Health has made provision to repay these funds early.
However, if this government funding IS forgiven, it is possible that those who have repaid these loans early may no longer qualify for some or all of the forgiven amounts. So, take it! It’s interest-free!
- If you don’t have an accountant today and have additional questions about this please feel free to reach out to Jonathan Tucker at (905) 601-5659 x101 or by email at email@example.com.
- If you are a Tucker Professional Corporation client and have received loan payments under COVID-19 Advance Payment Program, please let your TPC bookkeeper know. Also, feel free to share this advisory with fellow healthcare colleagues to assist them in avoiding costly errors.
- If you are a healthcare financial professional, additional program details are available by accessing any of the resources provided in links below. Feel free to share this advisory with your clients or prospective clients.
For more details, please visit the Ministry of Health website:
- Ontario Independent Health Facilities (bulletin 2145),
- Physician (bulletin 4754),
- Podiatrists (bulletin 7130),
- Optometrists (bulletin 8162), and
- Hospital-based dentists (bulletin 9142).
1 On April 23, 2020, the Ministry of Health announced the COVID-19 Advance Payment Program. This loan program is directed to healthcare professionals unable to deliver regular services during the pandemic (Ontario Independent Health Facilities, physicians, podiatrists, optometrists, hospitals).
2 Source: Ministry of Health, Info Bulletin: Keeping health care providers informed of payment, policy or program changes, April 22, 2020.