For Canadians preparation for our 2020 tax return is going to look a little different this year. Many of us take a closer look at our financial situations at the beginning of a new year with a view to reducing our tax bill and boosting our tax refund. However this new year the two biggest changes we have to take into account are any emergency benefits and relief measures we may have received due to the pandemic and the amount that we can claim if we worked from home in 2020 due to Covid.
The CERB benefits you received are taxable - when you first received these benefits the government did not withhold the tax at source so you will have to include 100% of this money in your income for the year and you will have to pay tax on it. The government will send you a T4A tax reporting slip for 2020 showing the amount that you will have to report.
The amount of tax that you will have to pay will depend on your total income for the year. For example if your work income was $27,000 and you received $8000 in CERB benefits your taxable income for the year will be $35,000 and both your earnings and the CERB amount will be taxed the same way. If your income is less than $12,000 for the year you will not have to pay any tax on your income.
If you received the Canada Recovery Benefit, Canada Recovery Sickness Benefit or Canada Recovery Caregiving Benefit that became available in September the government withheld 10% in taxes at source. However this may be insufficient to cover your tax due for 2020. In addition if your additional income for 2020 is more than $38,000 then you may have to pay back the CRB at a rate of $0.50 for each dollar you received, so you should set aside some funds to cover the tax you may owe.
If you received Covid-19 benefits that you were not entitled to, you were asked to return the funds by the end of 2020. You were not obligated to do so but it would have been the best scenario for most people. If you did not pay the money back then the amount will show up on your T4A for 2020 and you may have to pay taxes on it. Any repayments will be shown on a T4A slip for 2021 which will allow you to claim a deduction on your 2021 income and benefit return. This process is based on general rules in the Income Tax Act that apply to repayment of taxable income.
The Simplified Home Office Deduction
2.4 million Canadians worked from home because of Covid-19 this year and may be able to claim some home office costs on their 2020 tax return without providing receipts or asking employers to fill out a T2200 form. If you have been working from home for more than 50% of the time over at least four consecutive weeks in 2020 due to Covid-19 you will be able to claim a deduction of $2 for every day up to a maximum of $400. The CRA calls this a temporary flat rate method of calculating the home office deduction.
For those who have more significant home expenses you will need to use the more detailed method to calculate the home office break. You need to gather together all your home expenses including utilities, internet, heating, hydro etc to decide which method you want to use to claim your home office expenses. For more help use the CRA's new online calculator.
From an article by Erica Alini
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