Death and Taxes

Everyone has heard of Benjamin Franklin's saying, "The Only Two Things Certain in This Life are Death and Taxes." Both seem inevitable, except that death only comes once, whiles taxes are greedy and come all the time whether they are personal taxes, property taxes, corporate taxes or goods and services taxes. I thought I'd write a little on Canadian personal taxes since it is now what accountants call "tax time", and 2020's taxes have some changes that may be helpful to know for filing.

Right now in Canada people all across the country are collecting information to prepare their taxes. This year has a twist though because 2020 was a Covid-19 year so many people lost their jobs. There were forced shutdowns of businesses and limitations on the number of customers stores could have, and these limitations continue today. There are also still closures such as at your local recreational facility or the movie theatres which also impact earning ability for both the businesses and the people who work there.

Covid-19 Benefits - This all trickles down throughout the economy so the government set up many reliefs such as Canada Emergency Response Benefit for individuals who were affected by such measures. CERB has been adjusted and now is called the Canada Recovery Benefit. For businesses many have applied for the Canada Emergency Wage Subsidy which is still accepting applications. There is also the Canada Emergency Rent Subsidy for businesses and the Canada Emergency Business Account loan. This listing is just to give you an idea of a few of the reliefs available, and there is an abundance of information for help for those searching. When I mention businesses, I am referring to incorporated businesses above as you can also run a business as a sole proprietor or partner, but that is included in your personal income tax return.

An excellent research page if you are looking for any benefits is at https://www.canada.ca/en/services/business/maintaining-your-business.html

There are deadlines on many of these benefits, so if you need help, make sure you check what those are and apply before the deadline.

Tax Slips - For this year's taxes many who claimed the CERB benefit had no taxes withheld. The CRB benefit has taxes withheld. Either way you should get a tax slip to use when filing your personal taxes.

CRA Waiving Interest for 2020 personal tax returns?? - For this year the government has also said they will waive interest on your tax balance owing if you meet all of their eligibility criteria which I will list below.

1) Your total taxable income was less than $75,000

2) You received at least one Covid-19 benefit in 2020: 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 (EI) or any provincial or territorial benefits.

3) And you filed your 2020 tax return.

The Canada Revenue Agency has posted on their website that they will apply interest relief automatically if you meet all their criteria. How long will they not apply interest you ask - they have set the date to April 30, 2022. The interest relief is also only for your 2020 personal taxes and not on any prior balances owing.

Late filing penalties NOT waived - One other important point is to file your taxes on time because they are not relieving late filing penalties and they are 5% on your balance owing plus 1% for each month. All the good work you do filing on time may be thrown to the wind if you fail to file on time.

If you have self employment income you file by June 15th; otherwise the filing deadline is April 30th. The funny thing about this is that tax balances owing are due April 30th even if you need to file by June 15th, but this year I guess you can file by June 15th without worrying about how much you owe for interest purposes anyhow.

Writers and Self Employment Income - Personal Canadian tax returns are due by April 30th and if you are self employed they are due by June 15th. I thought with so many writers all in one place this information may be useful if you have some self employment income. In addition the government has simplified their work at home calculation. Now this may or may not apply as it was simplified for employees who were forced to work at home. If you had self employment income in the previous years and claimed home office expense, then just continue to do so in the way you know how.

Challenge Winnings - It should be noted winning a challenge is not generally considered income and does not need to be included in income. You may also check with your income tax provider if you win multiple times from multiple sources as then you may entering the "income" zone.

For more information you may look at the following folio from the CRA under prizes. https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-1-individuals/folio-2-students/income-tax-folio-s1-f2-c3-scholarships-research-grants-other-education-assistance.html#p3.56

Good luck with your taxes! And I hope may find this information useful for our unusual year. If you are wondering I have prepared and reviewed Canadian tax returns for approximately 30 years, so I try to keep up on all this good news.