What about my taxes – March 2021 Edition
Here we go again! Tax season is upon us, and the government has not yet announced any extensions to the tax filing deadlines as they did this time last year. Whether any announcements come out in the next few weeks is unclear, but so far, they are just planning to allow people some grace on some of the payable amounts people might have, as long as they file on time. Of course, given the unusual nature of the past year, the subsidies they provided, and the different ways people had to adapt to make ends meet, there is a bunch of new information you might need to know about that you didn’t think would be an issue until now. Below I’ve provided a couple of things that might be important if this is new to you.
If you received subsidies due to COVID-19
There were a few different subsidies that people could have taken in 2020 depending on what happened with their job, their health, their financial situation or caring for a loved one. It’s a bit of a double-edged sword. If you needed it, we’re glad it was available, but if you didn’t, you were in a better spot than many other people. Either way, if you did happen to take advantage of CERB, CRB, EI, CRSB, CRCB or Provincial Support, you should be on the lookout for either a T4A or T4E slip that will report which of these subsidies you may have received. If you were eligible for EI, then you should be going to your My Services Canada Account and finding a T4E. If you received any of the short 1-week to 2-week relief subsidies, or did not qualify for programs through EI, you’ll want to log into your My CRA Account and look for a T4A.
You’ll also want to prepare yourself for a personal tax bill. Many of the subsidies provided were based on having low income throughout the year, and needing quick relief to pay your bills for a short time. Many of them withheld very little if any tax. These subsidies do count as income, so if you took them, there is likely taxes that will be owing on them. That’s not all though – If your total income in 2020 ended up over $38,000 (or $79,000 if you qualified for EI), then you are likely going to need to repay some, if not all, of the subsidies you took. The wording on this makes it looks like only 50% of the subsidy might need to be repaid, however, it is based on how much you actually made in the year. If you took CRB at the end of the year and made $42,000 total excluding CRB, then 50% of the amount over $38,000 is repayable (50% of $4,000 over $38,000 = $2,000). Regardless of how much you received through CRB, the maximum repayment will be $2,000 based on this example. Receiving EI works the same over $79,000. CRA is also investigating a lot of people who received CERB and other subsidies to ensure they qualified to receive them. They sent out over 441,000 letters to ‘educate’ people who received CERB, but could not verify they qualified. This scared a number of people into repayment, whether they were entitled to keep their CERB or not.
If you worked from home
Standard practice allows people to claim Office-in-Home expenses every year if they are qualified to do so either through a Conditions of Employment (T2200), where they file a T777 Employment Expenses report, or for being self-employed and running a business or office our of their home on a T2125 Self Employment Report. Usually this helps people using their home to reduce their taxes by claiming a portion of their utilities, office space, supplies, and several other things. This year, the CRA decided to allow those working from home due to COVID the ability to claim up to $400 for these expenses on a shortened version of the forms (T2200S and T777S). However, ‘nice’ as this might be, in our experience it is far less than what people can usually claim. If you were sent home for 4 weeks to work from your kitchen table on a laptop, then yes, the $2/day rate that provided $40 total is probably sufficient. However, if you have a dedicated office with a full workstation, phone line, and worked for 9 months or more, then this was a slap in the face. If a person is using 12.5% of their home (1 room out of 8, or 200 sqft out of 1,600 sqft), from March – December, they allowed to claim 9.375% of their utilities, property taxes, home insurance, rent, mortgage insurance (they frown on this one though), home security, and even more on any supplies, stationary or furniture/equipment (computer, printer desk, chair, etc) they might have needed to buy to set this up. If we assume a simple version where 10% office-in-home rate is used for rent of $1,000/mo from March to December 2020, that earns a deduction of $900, or more than double what the simplified version allows. This example doesn’t include anything else you might also be able to claim.
For further information on these deductions for working from home, you can see our article from April 2020, “Sometimes you end up working from home” which is just as relevant now as it was then. https://www.zablockiaccountants.com/blog/sometimes-you-end-up-working-from-home
Back in October, we foresaw some concerns on what people might owe this year, or what they might have been able to claim because of this year. We tell our clients that any time they receive a subsidy that they want to try and save about 25 – 30% of it for taxes so they aren’t surprised by their bill, but it definitely ranges from client to client as situations usually differ from case to case. However, if you want our help with your specific circumstance, please contact us at Zablocki & Associates – our goal is help you save money and not spend a fortune figuring out how.
C. Zablocki