There are new rules this tax season, courtesy of COVID-19. Here's what you need to know
Those who worked from home may get money back while those who collected benefits may get tax bill
Heads up, Canadians: Due to the COVID-19 pandemic, this is going to be a tax season like no other.
If you collected COVID-19-related benefit payments last year, you might end up owing more money than in previous years. However, if you spent part of 2020 working from home, you could wind up with a bigger tax refund than usual.
Here's what you need to know about filing your taxes this season, including important deadlines.
Has the deadline been extended?
Despite this being a more complex tax season, the Canada Revenue Agency (CRA) has not extended the tax filing deadline. The due date is still April 30 for most Canadians, and June 15 for self-employed people.
To avoid interest charges, Canadians need to pay any taxes owed by April 30. However, not everyone has to comply with that rule this year.
Those who had a total taxable income of $75,000 or less and received one or more of the COVID-19 benefits listed below don't have to pay their taxes until April 30, 2022.
Canada emergency response benefit (CERB).
Canada emergency student benefit (CESB).
Canada recovery benefit (CRB).
Canada recovery caregiving benefit (CRCB).
Canada recovery sickness benefit (CRSB).
Employment Insurance benefits.
Similar provincial emergency benefits.
Qualifying Canadians "will have that full year after the filing deadline of April 30th " to pay any tax debt without facing interest charges, said Francesco Sorbara, Parliamentary Secretary to the Minister of National Revenue.
Those who qualify for the payment deferral still need to file on time if they owe taxes — or they'll face a late-filing penalty.
Will I owe taxes on my government benefits?
The benefits listed above are considered taxable income, so the federal government introduced the tax-payment deferral to help out the many Canadians who will have to pay taxes on their benefit payments.
"[Many] lost jobs and collected benefits, and they may have some amounts owing," said Sorbara. "We're giving some flexibility there."
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The government didn't withhold any taxes on CERB and CESB benefit payments Canadians received in 2020.
It did withhold a 10 per cent tax for people who received CRB, CRCB and CRSB benefits, but tax expert Jamie Golombek said many of those individuals will still owe the government money, as most Canadians' income is taxed at a much higher rate than 10 per cent.
"For many people, [10 per cent is] not going to be enough, particularly for those who had other sources of income throughout the year," said Golombek, managing director of tax and estate planning at CIBC.
"You may actually find out for the first time ever in your life that you actually owe some taxes."
Working from home? Claim your cash
Due to the pandemic, many Canadian employees worked from home for part of 2020, which means they may be eligible for a home office expenses tax deduction.
To qualify, you must have worked from home more than 50 per cent of the time for at least four consecutive weeks last year.
There are two options for Canadians claiming home office expenses. The first is the detailed method, which involves calculating what percentage of your household costs — such as electricity, rent and internet — can be applied to your home office space. Also, you're required to save all relevant receipts.
If that sounds like too much work, don't fret. To simplify the process for people who worked from home for the first time in 2020, the CRA has introduced a new, temporary flat rate method. It allows employees to claim a tax deduction of $2 for each day they worked from home, up to a maximum of $400.
"We've kept it simple. They can file it without filing any documentation, any forms," said Sorbara.
Software developer Pat Suwalski of Nepean, Ont., has been mainly working from home since April 2020. He filed his taxes on Wednesday using the flat rate method and said it took him just minutes to calculate his deduction.
"I'm a pretty honest guy, so I took a calendar and I started counting [work] days," he said.
Suwalski counted 188 work-from-home days last year. Multiply that by $2 a day and he can reduce his taxable income by $376.
"I'll take it," he said. "It's great that they made [the process] simpler."
Which method should you choose if you worked from home this year? Golombek said the flat rate method may be the best option if you're a homeowner, because it's easier and chances are you'll come out ahead.
That's because employees can't claim mortgage payments — typically a homeowner's biggest monthly bill — as a home office expense.
"Our experience is that homeowners, typically speaking, don't have enough expenses … to beat the $2-a-day method," Golombek said.
While homeowners can't claim their mortgage payments, renters can claim a portion of their rent based on the size of their home office space compared to their entire home. As a result, Golombek says they may reap bigger rewards by choosing the detailed method.
"Depending on [what] percentage of their home they're using, [renters] typically would probably come out ahead on the detailed method."
Digital tax credit
Golombek also points out one of the new wrinkles this tax season, which is that the government is offering a tax credit to people who subscribed to digital news services in 2020.
Canadians can claim up to $500 for subscriptions to qualifying Canadian media, such as newspapers, magazines, websites and podcasts, that don't have a broadcast licence and offer primarily original news content.
"I call it a bit of a fun new credit," Golombek said.
If you still have questions about your taxes, you can call the CRA tax information line at 1-800-959-8281. The agency said it has beefed up resources at its call centre, as it anticipates higher than normal call volumes this tax season.