What You Need to Know Before Filing Your 2021 Taxes with CRA

January 21, 2021 | Written by: Sohail Afzal

What to know before filing 2021 income tax in Canada

The tax season is just around the corner and the tax-filing deadline for most Canadians for the 2020 tax year-end is April 30, 2021. This deadline is for those who submit their personal income tax return based on the employment income. If you or your spouse/common-law partner has a self-employment income, you need to follow the deadline, i.e., June 15, 2021. Last year, the CRA gave a penalty-free extension for taxes owed till September 30, 2020. Although, the second wave of COVID hit most of the countries but you do not need to delay your taxes merely on the basis that the CRA will grant an extension this year too.

File Your Taxes On Time

It is always beneficial for taxpayers to file personal taxes before the deadline as the CRA will have to calculate various tax credits. If you file your taxes after the due date, it will always subject to have late filing penalty, and you can also miss the chance to get the CCB, GST/HST Credit, and other federal & provincial tax credits. If your tax return has a tax payable balance, there is no point in late filing. On the other hand, if your tax return shows a ‘0’ balance and you are getting a refund, there are no penalties for late filing but your eligible tax credits can be delayed.

Since the COVID has slowed down processes, it may delay your ability to file a tax return. It may further delay the assessment process and you may face delays in getting your tax credits. To avoid delays in your tax assessments, the CRA encourages you to sign up for the direct deposit and file the 2020 taxes online in the first quarter of 2021. When you sign up for direct deposit you can receive your refund in as little as 07 business days, and you’ll avoid any mailing delays on future tax benefits and credit payments due to COVID-19. To help provide better service to Canadians, the CRA has partnered with many Canadian financial institutions to offer taxpayers a direct deposit enrolment online through their financial institution’s website.

Filing CERB Payments

If you received the Canada Emergency Response Benefit (CERB) or the Canada Emergency Student Benefit (CESB), you will need to include 100% of those payments in your 2020 tax return. The government will send you all relevant slips to be reported in your 2020 tax return. To prepare your tax return, you must collect your T4 slips, T3 slips, the notice of assessment from your previous tax year, and a copy of the tax return to use as a template for the 2020 tax return. You should have received most of your slips and receipts by the end of February 2021. If you cannot get a slip for your income tax return or if you do not receive your slips, you may be able to get them from My Account as of February 2021.

Personal income tax returns this year for most Canadians will not be the same as the year before. In addition to income from employment or self-employment, you will need to report CERB income so that they can include it in your taxable income. In the second phase of COVID-19, the government withholds 10% withholding tax on almost all emergency benefits available to them. However, these withholding taxes may not be sufficient to cover the overall tax liability.

If you are one of the 2.4 million Canadians who have worked from your home in 2020 due to COVID, you will likely be able to claim home office expenses on your return without having to sift through receipts or ask your employers to fill out forms. If you are an employee who worked from home more than 50% of the time for at least four consecutive weeks in 2020 due to COVID-19, you will be able to claim a deduction to a maximum of $400.

There are other things you should take into account while preparing your 2020 tax return and if you are confused about what to claim what not to, you can contact GTA Accounting who will assist you in preparing and filing your taxes with accurate numbers.

Sohail Afzal CPA Toronto

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.

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