Here are some things to keep in mind as you get ready to file your 2020 tax return.
1) Know your tax deadlines
Filing on time not only saves you from late payment fees, it also ensures you will receive eligible tax credits, benefits and returns. Parents, for example, receive the Canada Child Benefit (CCB) monthly, but it’s currently based on their 2019 income. If your income dropped in 2020, you could be receiving a larger monthly CCB payment.
But if you don’t file before July, you’ll stop receiving the payments altogether.
Here are some important tax deadlines to keep in mind.
April 30th –
Deadline for employed individuals to file personal tax returns and pay all personal income taxes owing.
April 30th –
Deadline for self-employed individuals, business owners and their spouses to pay all personal income taxes owing.
June 15th –
Deadline for self-employed individuals, business owners and their spouses to file personal tax returns. Note that, although you have until mid-June to file, all income taxes owing must be paid by April 30th to avoid an interest penalty from CRA.
2) Pay your taxes early
If you miss the filing deadline and don’t owe any tax, you may not be penalized. But if you miss the filing deadline and you owe money, you’ll be subject to a late filing fee, plus daily accrued interest on money owing.
3) Report your Canada Emergency Response Benefit (CERB) as income
Millions of Canadians received CERB income between March and September, 2020. Unlike Employment Insurance and the Canada Recovery Benefit (CRB), the CERB was not taxed at source. This means it must be reported as part of your gross income and you will be required to pay any taxes owing.
The maximum amount an individual could receive under CERB was $14,000. To calculate any taxes owing, the gross CERB income you received will be added to your gross 2020 employment income and EI benefits in 2020, minus any tax you’ve already paid.
4) Claim all eligible tax reductions
There are claims you can make on your tax return to lessen your taxes owing and possibly get a tax return. Some are new for 2020. Here are a few to keep in mind for this year’s return.
Work from home tax credit (New)!– Canadians who worked from home for four consecutive weeks in 2020 can claim $2 per day for costs associated with work, up to $400 through the simplified version. You could be eligible to claim more home office and business expenses if you and your employer choose to use the complex filing method
– This is the most overlooked claim on Canadian tax forms. You could be eligible for money back on any out-of-pocket expenses not covered by private insurance or provincial health insurance. This includes insurance premium, doctor and hospital fees, prescription medication and supplies, dental and many other items
5) Look for any claims you may have missed in previous years
If you forgot to claim your child’s university tuition fees in 2018, you still have the chance to get the tax deduction owing. Canada Revenue Agency (CRA) allows you to adjust your tax returns for any of the previous ten years
Note: Tuition fees and books, if not transferred in the year the are earned can be carried forward
to offset the student’s future income.
6) Consider carrying-forward contributions that don’t give you a tax benefit
If your income was reduced in 2020, but you think you’ll earn more again soon, you don’t have to claim your 2020 RRSP contributions on this tax return. You can wait and claim it next year or the year after to reduce your taxable income once you’re in a higher tax bracket, which will give you a bigger return.
Your tax accountant can offer the best individualized advice on your eligible claims.
If you want to update your investor profile, discuss savings or get advice on debt, reach out to your SISIP advisor.
The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This article was written, designed and produced by Financière SISIP Financial for the benefit of Financière SISIP Financial a trade name registered with FundEX Investments Inc., and does not necessarily reflect the opinion of FundEX. The information contained in this article comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities.
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SISIP Financial, February 16, 2021