It’s hard to believe that a year ago we barely heard about COVID-19 and now it is part of our day-to-day conversation and it’s become a major focus of our lives.
The past 12 months have seen many COVID-19 related benefits paid by the federal and the provincial governments. Many are not-taxable, but some have tax implications.
The non-taxable benefits paid by the federal and provincial governments were focused on seniors and those with disabilities.
There were additional benefits paid to families: CCB (Canada Child Benefit) $300 per child in May and a special GST Credit was paid to lower income families in April. These were also non-taxable.
Owing CRA
My biggest concern is for those of you who received the taxable income benefits. I recommend you get your taxes processed and filed early so you know what the result is. Will you owe Canada Revenue Agency (CRA)? And how much? Or do you have a much smaller refund than normal?
If we get your taxes processed in February or March, it doesn’t mean you have to pay it right away. But at least you will know if you owe CRA and you can pay it by April 30 without penalty or interest. Or you can make arrangements with CRA about how to repay it.
Do not avoid filing your taxes on time. It will just be worse with additional penalties for late filing. As far as we know, the filing deadline is still April 30 2021.
CERB
Canada Emergency Response Benefit was paid to those who lost all or almost all their employment or self-employment income due to the pandemic. The benefit was $2,000 per four week period from March to September 2020.
There was no tax withheld on these amounts, so many taxpayers may end up with taxes payable when they normally expect refunds.
CRB CRSB CRCB
The Canada Recovery Benefit replaced the CERB at the end of September for those who still had no work or had reduced income due to the pandemic. The income is $1000 every two weeks and there is $100 tax deducted. But 10% tax deducted is likely still not enough depending on your other income for the year. So be prepared you may still owe CRA once your taxes are reconciled. The Canada Recovery Sick Benefit is similar: $500 per week for up to two weeks if you were off sick. And the Canada Recovery Caregiver Benefit is also $500 per week for up to 26 weeks to care for a child or other dependant because you need to stay home and not work.
If you received the CRB and your total income for the year is more than $38,000, you will have some of that CRB income “clawed back”. So if you can, buy some RRSPs before March 1 2021. You can get your taxes “estimated” before the end of February to find out if the CRB will be clawed back. RRSPs will reduce your taxable income and save some of your benefits.
Manitoba Risk Recognition Program (“Risk Pay”)
This program was based on applications to Jun 29 2020. The amount paid was $1,377 (net of 10% tax withheld). A T4A will be issued February 2021.
Manitoba Job Restart Program
This was a $2,000 taxable benefit for Manitobans who returned to work and voluntarily stopped collecting CERB. The application period ended July 31, 2020. A T4A will be issued February 2021. There was no tax deducted from this income.
Manitoba Caregiver Wage Support Program
This financial benefit provides a $5 per hour wage supplement to eligible front-line workers that provide direct patient or residential care to vulnerable Manitobans, between November 1 2020 and January 10 2021. There are two application intakes: Dec 7 to Dec 14 2020 and January 11 to January 18 2021. There will be 10% tax deducted and the T4A will be issued for 2020 and 2021 respectively.
Work From Home Deduction
In December, CRA announced a temporary flat rate of $2 per day to a maximum of $400 deduction for employees that worked from home due to COVID-19. We did some calculating, and if your home expenses are about $1400 or less per month and you used a shared space and not a dedicated room, the flat rate may be the best way to claim your home expenses. You do not require your employer to provide any form to make this claim. Home expenses for home owners is limited to hydro and maintenance only; or rent for tenants. The $400 deduction will save you $103 to $186 in taxes.
The more detailed method may be more beneficial if you had a dedicated space (spare room). It is more work for you to get the numbers all together. Plus your employer needs to complete and sign the T2200 Conditions of Employment form. Keep in mind how much work is involved to save just a bit more in taxes.
Tax Service Options
CRA opens on February 22: the first day we can e-file your 2021 taxes, but we can prep your taxes before then, so when you are ready, call our office to find out how we will be accepting your tax information.
Most government tax slips we can get from CRA: CPP, OAS, EI, CERB, CRB, EIA; all of these we can electronically access. So don’t wait for them, call us starting early February and we’ll check to see if we can download them.
During tax season, we will be following the public health guidelines and will need to minimize client contact in our office. We encourage clients to get their tax information to us by one of the following:
- Phone; we can take your information over the phone and verify any tax information we can access from CRA;
- Secure email: to send documents electronically;
- Drop off at our new secure and convenient drop off chute
Once your tax return is processed we will review with you over the phone or secure email for you to approve before e-filing your tax return to CRA. We can mail your documents to you, or send by secure email, or you can pick up at our new “tax shelter” (shed) at the back of our office.
We plan to send our yearly “tax checklist” to you via email if we can. Please email our office: info@sataxes.ca so we have your email address on file, or call us at 204.422.6631. And we will make the information available on our website by the end of January too: SteAnneTaxService.ca
Thank you for the trust you have placed in our team at Ste Anne Tax Service. We will focus on your personal taxes from February to April so you can focus on what’s most important to you: the health and safety of you and your family.
Anni Markmann is a Personal Income Tax Professional and Certified Financial Planner; living, working, and volunteering in our community. Contact Ste Anne Tax Service at 204.422.6631 or 36 Dawson Road in Ste Anne (near Co-op) or info@sataxes.ca