This year may be an especially tricky year for filing taxes with an abundance of forms and a lack of clarity. With a number of relief checks handed out throughout the year to people in need, many Canadians aren’t sure whether they’ll owe taxes this year.
In this blog, we’ll explain some of the common questions people have this tax season, including: when tax season begins, when the deadline is, why you may owe taxes this year, and some new relief benefits that may alleviate some of your tax burden.
When does tax season begin and when is the tax deadline?
For employees who love the thrill of filing their taxes, NETFILE opens on Monday, Feb. 22. An early start seems like an especially wise decision year, employees should make sure they’ve received all the forms they need before beginning.
For most Canadians, the deadline to both pay and send in your tax return is Friday, April 30.
Why Your T4 Will Look Different
For this tax year, the CRA has introduced new reporting requirements for the T4 slip issued to employees. These requirements apply to all employers and are to help the CRA confirm payments under the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Response Benefit (CERB), and the Candian Emergency Student Benefit (CESB).
There will be four new T4 codes to report gross employment income and retroactive payments:
Code 57: Employment income – March 15 to May 9
Code 58: Employment income – May 10 to July 4
Code 59: Employment income – July 5 to August 29
Code 60: Employment income – August 30 to September 26
Why you may owe more taxes this year
When the government issued the CERB at the beginning of the pandemic, they didn’t withhold any tax. That means any Canadian who received CERB cheques must include the tax owed in their return.
How much you’ll owe depends on your 2020 income. If you earned $80,000 this year and collected $4,000 from CERB, your taxable income will be $84,000. Your income and your benefit will be taxed the same way. Anyone with total income under $12,000 won’t owe any tax at all.
If you received the second round of COVID-19 benefits in September—the Canada Recovery Sickness Benefit and the Canada Recovery Caregiving Benefit (CRCB)—then the government kindly withheld 10% in tax. This amount, however, may not be enough depending on your income. Likewise, those who earned more than $67,750 this year may have to repay some of their EI benefits through their tax return.
Finally, check with your provincial government to see if you owe tax on their benefits. Two such examples are the Alberta Emergency Isolation Support and the New Brunswick’s Workers Emergency Income Benefit.
New Tax Breaks
Though there are new ways in which you may owe taxes this year, there are ways in which they may find some relief. Check to see if you are eligible for any of the deductions and credits available, which may reduce or eliminate your liability.
Work From Home Benefit
If you worked remote for more than 50% of the time over four consecutive weeks due to COVID-19, you’ll be eligible to claim a portion of your costs without any additional paperwork. This year, the CRA is using a temporary flat-rate method of calculating home office deductions and for everyday you worked remotely, you’ll be able to claim $2—up to a maximum of $400.
Digital Subscription Tax Break
In an effort to keep newsrooms alive, the Canadian government is offering a tax break for people with a digital subscription to a Canadian news outlet. Each person is eligible to claim $500 a year to a qualifying journalistic outlet.
If all the complications of tax season are causing undue stress, fear not. If you received COVID-19 benefits through your CRA My Account, almost all of the stress will be removed. NETFILE-certified tax software will connect to your CRA account and automatically populate your tax return with the correct information.
This year may present some unique hurdles, but with the right guidance you will be able to accurately have your taxes filed in no time. And before you know it, tax season will be comfortably behind you.
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