Everything you need to know about your 2020 taxes

As tax season begins, Canadians are faced with filing for an unprecedented year – job losses, federal financial aid, and working from home are just some of the major adjustments made over 2020.

The Canada Revenue Agency (CRA) has listed all the deadlines for the 2020 tax year on their site. April 30, 202, is both the filing and payment tax deadline for individuals.

 PREPARING TO FILE

 This year’s tax returns could look very different than what Canadians are used to – and to plan accordingly. For millions of Canadians, this might be the first time that they could actually owe money when they file their tax return. People are used to getting a tax refund and this year could be different because they’ve received all these benefits in many cases, haven’t paid tax on it.

And like most tax years, it is better to be early – especially with the added paperwork Canadians may face with COVID-19 benefits.

Canadians can start electronically filing their 2020 tax returns starting on Tuesday, Feb. 23

PAPERWORK TO WATCH FOR

Individuals filing their taxes are familiar with the T4 tax form, but this year there are some changes to the T4 to be aware of, and additional tax slips to watch out for.

If you are an employee and you were not furloughed or you continued to work through 2020, your T4 will look a little different. Some additional boxes will be populated in your 2020 form, and those are really for information purposes for CRA because if your employer took advantage of any of the wage subsidy programs in 2020, those would have been applied for on a period-by-period basis.

Canadians who have been receiving their benefits through the online CRA “My Account” system will have an auto-fill component for most of their tax forms, otherwise, they may be stuck filling them out manually if they file their own taxes.

If you received benefits through the CRA, you’re most likely going to receive a T4A slip from the government, whereas If you received money from Service Canada, such as Employment Insurance benefits or CERB payments that were not processed by the CRA, you will see a T4E slip, which you must fill out and include.

WORKING FROM HOME

One of the biggest adjustments Canadians has made since March 2020 is working from home.

Canadians who have worked from home more than 50 percent of the time for at least four consecutive weeks have two ways to claim it on their tax return.

If you opt for the temporary flat-rate method, it’s pretty simple, you can deduct $2 for each day you worked from home, up to a maximum of 200 days and a maximum of $400.

The flat-rate method does not need any forms from an employer to be used.

However, if an individual is certain they would be entitled to more than $400, or they are self-employed, the detailed method must be used.

If you decide to choose the detailed method, it is important to note that your eligible expenses are prorated based on their use for business purposes. If it’s half personal and half business, you can deduct 50 percent of the amount of each invoice for the months you were working from home.

If you use the detailed method, you actually calculate the expenses associated with working from home prorated based on the square feet of the space that you’re using, divided by the total square feet of your home. Besides, if you have a shared space, like using the kitchen table or the dining room table, which presumably you eat in, or you do something else with that room, you’re also supposed to prorate based on the hours.

If you’re a homeowner, maybe your biggest expense – your mortgage – isn’t eligible, nor is your property tax.

So it’s only the prorated portion of your utilities, things like electricity, heating, and internet that are eligible. If you’re a renter, you could include a pro-rata portion of your rent.

The CRA has an online tool to help calculate work from home expenses for the detailed method, which also requires a signed T2200S form from an employer and a filled-out T777S form when filing a return.

Employees who are claiming other employment expenses (for example motor vehicle expenses) or who did not work from home in 2020, cannot use the new temporary flat rate method, according to a statement emailed to CTVNews.ca Thursday by a CRA spokesperson.

These employees must get a completed and signed Form T2200, Declaration of Conditions of Employment, from their employer and fill out Form T777, Statement of Employment Expenses.

2020 marked a massive year for Canadians working in the gig economy, such as driving for Uber for delivering apps like Skip the Dishes.

This is the first time in their life that they have self-employment income. They’re going to have to file a special form when they file their return statement and business activities and they’re going to be able to deduct certain expenses…if this is a side hustle for some people, I think that could complicate matters a little bit.

CERB, CESB, CRCB, CRSB, CEBA, AND CEWS

The COVID-19 emergency and recovery benefits administered by CRA – Canada Emergency Response Benefit (CERB), Canada Emergency Student Benefit (CESB), Canada Recovery Benefit (CRB)Canada Recovery Sickness Benefit (CRSB), and Canada Recovery Caregiving Benefit (CRCB) –  are considered taxable income.

This means some recipients may owe tax when they file a return, depending on their personal circumstances, the type of COVID-19 emergency benefits received, other sources of income, deductions, and credits, according to the CRA.

Prime Minister Justin Trudeau announced on Feb. 9, that the CRA won’t charge people interest on overdue taxes from benefit programs for at least one year.

Interest on income taxes will be waived until April 30, 2022, according to the CRA, but individuals need to earn less than $75,000 in total taxable income to qualify for the relief.

Canadians who are unable to pay their taxes owing on federal benefits are suggested to contact the CRA and ask for an installment payment agreement, which allows them to spread their debt payments between now and April 2022.

Small business owners who took advantage of the Canada Emergency Wage Subsidy (CEWS) or the Canada Emergency Business Account (CEBA) interest-free loans, should also be vigilant when filing paperwork. Folks might not realize that the income is actually reportable in that recording period, not necessarily when you receive the money.

For example, if you’ve had a year-end and later on you decide you’re going to go ahead and do a claim for a couple of months of the wage subsidy, and you received that that funding from the government, that income actually belonged on the year-end that would have just passed.

For CEBA, a similar concept applies.

There’s a forgivable portion of the loan that is repaid before Dec. 31, 2022, but that forgivable portion is actually considered income at the same time we receive the proceeds from CEBA – not when it’s actually forgiven.

TAX CREDITS TO WATCH FOR

It is important to watch out for credits and deductions Canadians may qualify for, even if they do not have anything to do with COVID-19.

If you are a first-time homebuyer and you used your RRSP to buy your home, there is a credit that’s available in addition to being able to take $35,000 out of your RRSP to make that purchase. There are adoption expenses tax credits and working tax benefits also available.

The new credit available in 2020 for Canadians who have a digital news subscription, where they can “claim a 15 percent credit for up to five hundred dollars“ they paid for a qualifying digital news subscription to any Canadian journalism organization. Broadcast news is not included.

There is also the Climate Action Incentive for Canadians living in Alberta, Saskatchewan, Manitoba, or Ontario that is meant to help reduce your tax or give you cash to offset the cost of a carbon tax in provinces that don’t have a carbon pricing scheme of their own. The tax credit will vary depending on family size, and can only be claimed by one individual per family.

Source: TVNews.ca

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