For the average taxpayer, financial documents can be hard to organize, even under the best circumstances. When you consider the year we just had, taxes may be more difficult than usual! Here are some tips to make things easier as you take work-from-home, CERB, and more of 2020’s unexpected curveballs into account when preparing your taxes!
CERB Is Taxable Income
If you received the Canada Emergency Response Benefit (CERB) in 2020, you should know that the government will tax it as income. Unlike employment income, which automatically removes the income tax, taxes on the CERB were not deducted before being sent out. Don’t worry about trying to go back and figure it out: the government will be issuing T4A slips that show the total amount of CERB a person received. You must report this amount as income when filing your 2020 income tax return.
The Federal government released more benefits in response to how lockdowns and physical distancing affected work: the Canada Recovery Benefit (CRB), the Canada Recovery Sickness Benefit (CRSB) for self-employed individuals, and the Canada Recovery Caregiving Benefit (CRCB). On these, the government should have already deducted a 10-percent withholding tax.
However, depending on their marginal tax rate, recipients may still owe the difference based on their total taxable income in 2020. For example, with CRB, if one’s net income was over $38,000 without the benefit in 2020, they may need to pay some of it back.
Work From Home
Workers can offset some of the tax if the pandemic and government restrictions forced them to work from home. These include home office expenses and a portion of home utilities like electricity, heat and water. We don’t know yet how the Canada Revenue Agency will determine and scrutinize these claims. All workers should keep track of when they began their remote work, how often, and for how long.
A worker can claim home office expenses if they use the space for at least half of the total work time. This rule extends to the entire year, but given that many people only are working from home for a portion of the year, the CRA will consider cases on an individual basis. The CRA bases this portion on the office size related to the total square footage of the home.
Documentation from the employer must use Form T2200: Declaration of Conditions of Employment. Any expenses that an employer provides or reimburses, like office supplies or access to home internet, cannot be claimed.
Taxes Are Due At The Same Deadlines As Every Other Year
Individual tax returns and payments are still due on April 30; self-employed returns are due on June 15. The CRA may mandate an extension of the deadline, but this has yet to be announced. Make sure that you are still completing your taxes and paying anything owing by the appropriate deadline.
Consider Having Your Taxes Done Professionally
Anyone can file their taxes, but this year will be unlike any we’ve seen before. Taxpayers will have to navigate new issues and factors, especially if they have moved into a home office or own a small business. Accountants are here to make sure their clients do not miss out on any documents or filings.
Much like any other business, accountants and tax-filing services have to follow safety procedures related to COVID-19. We are working to help clients complete their returns without having to sit down in-person. If you’re unsure about tax time this year, get in touch with us today!