It is important for Canadians to start preparing 2020 taxes as tax season in Canada has just kicked off. The deadline to file your tax return and pay your taxes is April 30, 2021. If you collected any benefits of COVID-19 from the government in 2020, it is most likely that you will be in a tax payable position instead of qualifying for a tax refund. At GTA Accounting, our professional team has developed a T1 Checklist so that we can ask you for all the information needed to prepare your taxes and ensure that our tax team captures all the applicable federal and provincial tax credits for you. The team is also well aware of all the new tax changes that might affect your taxes in 2021.
The Canada Revenue Agency (CRA) allows taxpayers to take advantage of certain allowable tax deductions and credits that can save you a lot of money on your annual taxes. It can be difficult for you to know what type of deduction you can claim to reduce your tax liability. Here are some of the new tax changes you should focus on before you file your 2020 income tax return with the CRA:
Home Office Expenses Deduction
Since millions of employed Canadians worked remotely in 2020 due to the COVID-19, the government has made it easier to claim a deduction for home office expenses. To qualify for the home office expenses deduction, you must have worked more than 50% of your usual work hours from home for at least four consecutive weeks in 2020. If you meet this threshold, you can deduct up to a maximum of $400 using this new temporary flat rate method to claim the deduction without any receipts or other documents.
Canada Training Credit
You can report your tuition or training fees for 2020 on your annual tax return. If you are unsure whether you qualify for the Canada Training Credit (CTC) or what your account balance is, check the Notice of Assessment you might have received from the CRA after you filed your 2019 return or you can check this by accessing your My Account online. The Canada Training Credit (CTC) is a new refundable tax credit available for 2020 and beyond to help Canadians meet the cost of eligible training expenses. The credit can be claimed for tuition and other fees paid for courses you took in the year for which you are claiming the credit.
Canada Pension Plan Enhancement Deduction
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2021 will be $61,600, previously it was $58,700 in 2020. The basic exemption amount for 2021 is the same, i.e. $3500. The new CPP contribution rate for both employer and employee in 2021 will be 5.45%, previously it was 5.25% in 2020. The maximum CPP contribution amount for both employer and employee in 2021 will be $3,166.45 each, previously it was $2,898.00 in 2020.
Last year, many individuals received COVID-19 benefits in the form of Canada Emergency Response Benefits (CERB), Canada Recovery Benefits (CRB), and many other benefits. You must report the income that you received from any of the COVID-19 income benefits. The CRA will issue you a T4A or T4E slips by the end of February that will have the total amount you received against those benefits.
- CERB – No tax has been deducted at source and you will have to pay taxes on the total amount you received under this program.
- CRB – the CRA withheld 10% tax on the amount you received under this program.
If you don’t have enough deductions, credits, or taxes withheld from other income sources to offset the amount owed to the CRA, it might end up you paying taxes to the CRA. The same goes for any COVID-19 benefit payments you have received and later on, the CRA found that you were not eligible for it, the CRA will ask you to reimburse them.
If you want GTA Accounting to prepare your 2020 personal taxes, you will need to complete the T1 Checklist to the best of your knowledge, as it has all the details we will need when preparing your taxes. This year, preparing and filing personal income tax returns can be a bit tricky as the CRA has changed and updated its tax rules to transfer the maximum benefit to the taxpayer during the time of this pandemic. Please reach out to us and we will discuss with you all the details necessary to capture all applicable federal and provincial tax credits for you.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.