The COVID-19 pandemic has, and continues to, impact every aspect of our lives. And for many the pandemic has had a direct impact on finances. As we approach the tax deadline, it is important to understand the tax implications that any government benefits will have – as well as any new tax breaks for which you may be eligible.
To make filing your taxes as seamless as possible, Coast Capital has created a list to help prepare you to file your taxes in advance of the April 30 deadline.
1. Taxable Emergency Benefits
In 2020, if you accessed either the Canada Emergency Response Benefit (CERB) or the Canada Emergency Student Benefit (CESB), you need to know that both are considered personal income. BC residents who earned more than the newly raised provincial basic personal amount of $10,949 in 2020 must pay taxes on the benefits they received.
Hopefully you have held back some of your funds to cover those taxes, if not you may need to set up a payment plan or take a lower-interest loan to help if you owe the government as a result of these benefits.
Anyone who received emergency benefits will have received a T4A or T4E tax form from the government. If you received benefits that have already been taxed at 10 per cent, you should note that dollar amount and include it in your personal income tax filing.
2. Non-Taxable Emergency Benefits
In 2020, there were some benefits that are not considered a taxable benefit – which means you won’t need to think about them when filing this tax season.
• BC Recovery Benefit: A one-time, tax-free payment of up to $1,000 for eligible families and single parents and up to $500 for eligible individuals. Applications are open until June 30, 2021.
• BC Emergency Benefit for Workers: A one-time, tax-free payment of $1,000 for BC residents whose ability to work has been affected due to COVID-19.
• Canada Child Benefit: The amount of this benefit increased in July 2020 and the federal government also provided a one-time top-up of $300 per child in May of 2020. Parents who did not receive these funds can still apply to do so.
• Seniors Payment: A one-time, tax-free payment of up to $500 for those 65 and over.
3. Working From Home
One thing that will be easier this tax season is declaring work from home expenses.
With so many transitioning from the office to a work from home model, the Canada Revenue Agency (CRA) has launched a temporary flat-rate method. The method allows Canadians to claim up to $400 in remote working expenses. To take advantage of the benefit, you don’t need to have tracked any expense or submit any forms you’re your employer. Anyone who worked more than half of the time from home for a period of at least four consecutive weeks is eligible for the temporary flat-rate of $2 per day.
If you did incur significant expenses from working from home, you may be eligible for more than $400 and you should follow the traditional filing approach to claim. This will require a signed T2200 from your employer, along with other details.
4. Payment Extensions
If you do owe taxes for the last year, there is one thing that may provide you a bit of comfort. The CRA won’t charge any interest on the taxes you owe from your 2020 return until April 30, 2022. However, this is only if your income is less than $75,000 and you received any emergency benefits in 2020.
Tax season is always challenging, and this year will prove to be more intense for many. Always remember that your financial institution can help.
While these are helpful tips, please visit the Revenue Canada Website for more details on the impact the Emergency Relief Measures may have on your 2020 tax return.
For more information on how we can help, please visit coastcapitalsavings.com/turbotax
Lisa Colangelo is Senior Vice President, Retail Banking at Coast Capital and has more than 20 years experience helping Canadians achieve financial wellbeing.