Last Updated: January 7, 2021
Happy New Year! It was so nice to see the back end of 2020. As an accountant specializing in tax compliance, 2021 is going to be an interesting year. With all of the different government initiatives that were handed out last year, we now get to start to actually see how this will impact an individual’s personal tax situation. If you are a business owner, there are some additional implications for you as well.
Initially, I was going to try and put this all into a single blog post, but I’ve realized that I’m going to have to put it into two posts. In this post, I’m going to highlight some of the personal tax questions. I’ll follow-up with a second post on the business side of things.
Note: As stated in this previous blog post, all of this has a huge caveat on it. There could be some updates to each of the posts in the coming months, as the pandemic is continuing a lot longer than what was anticipated in the fall of 2020. I wouldn’t be surprised if there were some additional measures provided. If you’re reading this now and want to stay up-to-date on all the changes from the CRA, kindly refer to the “last updated” date at the top of this post in the future to make sure you are getting the most updated information.
Personal Taxes and COVID Support
In 2020, there were a number of Federal Government programs were created to support the people of Canada. Many of them resulted in Employment-like income to help people pay their day-to-day bills when their places of work were closed down or their sources of income stopped. For those people who have received funds from either the Canada Revenue Agency or Service Canada in 2020, you can expect to receive either a T4A or a T4E. This income will need to be included in your 2020 personal income tax return.
This would include payments received under the following programs:
- CERB – Canada Emergency Response Benefit
- This program has ended. It was one of the first programs that the government provided to individuals. It paid up to $8,000 in income to individuals.
- https://www.canada.ca/en/revenue-agency/services/benefits/apply-for-cerb-with-cra.html
- CRB – Canada Recovery Benefit
- This program is still available. It is available until September 25, 2021. It is for employees and self-employed individuals who don’t qualify for EI Benefits
- The maximum amount available to be paid to each person under this program is $13,000.
- Any amounts received under this program in 2020 will be taxable in 2020. If you receive payment under this program in 2021, you will be taxed in 2021.
- https://www.canada.ca/en/revenue-agency/services/benefits/recovery-benefit.html
- CRCB – Canada Recovery Caregiving Benefit
- This program is still available. It is available until September 25, 2021. It is for employees and self-employed individuals who cannot work because they are looking after a child (under 12 years of age) or a family member that requires supervised care.
- The maximum amount available to be paid to each household is $13,000.
- https://www.canada.ca/en/revenue-agency/services/benefits/recovery-caregiving-benefit.html
- CRSB – Canada Recovery Sickness Benefit
- This program is still available. It is available until September 25, 2021. It is for employees and self-employed individuals who cannot work because they are sick or have to self-isolate due to COVID-19, or the person has an underlying health condition that puts them at greater risk of getting COVID-19.
- The maximum amount available is $1,000.
- https://www.canada.ca/en/revenue-agency/services/benefits/recovery-sickness-benefit.html
Home Office Expenses for Employees
Generally, the ability to expense home office-related expenses for employees is very restricted. The normal conditions require that having a home office needs to be included in your employment contract and a form (T2200) is required to be signed by your employer on an annual basis. However, as a result of the COVID-19 pandemic, many offices were required to close and employees were required to perform their jobs from home. The government has now provided some guidance on what they are doing to support this temporary change in employment conditions.
The CRA website has a few pages that help people walk through the options that are available to them. You will have your choice on your 2020 personal tax return as to whether or not you want to claim $2 per day or to claim the actual amounts that you have had to pay to maintain your home office.
If you do choose the detailed method (claiming the actual amounts that you have had to pay), then a Form T2200S will need to be completed by your employer. And on your tax return, you will need to fill out the Form T777S that will accompany your personal tax return. If you have received some form of reimbursement for the home office expenses, it will only be the non-reimbursed portion of the expense that will be eligible for the deduction.
As of right now, this deduction is only applicable to the 2020 tax year.
If you have any other personal tax questions that you would like the answers to, please feel free to email me at info@daynahollandltd.com and I’ll be sure to include the answers to them in my next blog post!
Best,
Dayna Holland, CPA, CA (she/her)
CEO of Dayna Holland Ltd.
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Are you self-employed and wanting to improve your bookkeeping habits so that you can get ahead in 2021? Be sure to check out this blog post for my top three recommendations based on conversations I’ve had this year with entrepreneurs.
Click here to learn more about Dayna Holland, CPA, CA.