COVID-19: The Historical 2020 Pandemic
The COVID-19 pandemic has been challenging and has brought a few temporary tax changes to the 2020 tax season. While the internet is flooded with COVID-19 information, we are going to list only a few of the most asked about topics for the 2020 tax season. For more COVID-19 information and updates you can go HERE
Many people experienced building a “make shift” office in the kitchen beside the left over cereal bowls, or stuffing themselves behind the laundry pile balancing their laptop on a box of old high school trophies. Let’s face it, not everyone was prepared to work from home! In response to the shifting chaos, Canada Revenue Agency (CRA) introduced two new methods of claiming home expenses to help ease the situation and this is what they are: Both deductions will directly reduce the income that you will pay tax on, so they reduce your overall income tax liability. *PLEASE NOTE* Depending on your situation, the Temporary Flat Rate method may generate a better deduction than the Simplified Detailed Method. CRA has provided a calculator to help calculate and compare claims under both methods HERE If you have been eligible to claim office in home expenses in the past using a T2200 form, nothing has changed for you other than you may be able to claim a little bit more in 2020 because you worked from home more.
Where the work space is not exclusively used for employment purposes, your calculation must be reduced for the non-employment use of the space. For example, if you are working 40 hours per week out of 168 hours per week from the dining room, and it constitutes 12% of total finished area of home, employment use would be 2.86% of the home (40 hours/168 total hours x 12% = 2.86%) for each week. Also, where the work space in home was only used for a portion of the year, even if there were multiple periods of working from home, only expenses related to the days or weeks working from home can be claimed.
So now you’ve made a nice coffee and green tea station on top of that odd piece of equipment that your boss told you to buy that you will NEVER use again! Let’s talk about that, and a few other things here…. Home Office Equipment Many people were not equipped to work from home and did not have the necessary computer or home office equipment (desk, office chair, etc.) to perform their employment duties. To ease that issue, CRA will allow up to $500 as a non-taxable reimbursement for those items that had to be purchased. For example, if you purchase a computer for $400 and an office chair for $250, your employer can reimburse up to $500 without you receiving the amount as taxable. BUT, if the employer reimburses you the full amount for these purchases, the amount over $500 (that is, $150) must be included in your income. Commuting Costs (including parking) The CRA will not consider you to have received a taxable benefit where your employer pays for additional commuting costs incurred by you during the COVID-19 pandemic, that are over and above your normal commuting costs including, for example, to pick up equipment. When a regular place of employment is closed due to the COVID-19 pandemic, the CRA will not consider parking to be available for employee use, therefore, employer-provided parking will not result in a taxable benefit. In both situations, the CRA expects appropriate records to be maintained (receipts and total kilometers driven when commuting between home and regular place of employment)
Since the CERB is taxable, you can expect to receive an information slip indicating the total amounts of CERB payments you received in 2020. We have access to the information through Represent a Client, but we still ask you to load the slip in your client portal so that we can verify the information we are reporting for you is the same. Please verify that the slip you receive matches to the COVID-19 benefit payment amounts received. You can review it by checking your “COVID-19 Support Payment Application Details” in CRA My Account. The chart will not include any repayments you made. If you’ve received COVID benefits with little or no tax withheld in 2020, you could have tax owing.
In order for you to earn income, carry on a business or attend an educational institution, you may need child care in which you are allowed to deduct from your earned income. For 2020 and 2021, earned income will also include COVID relief payments for which you receive a T4A or T4E, as well as EI benefits.
Interest will be waived on your 2020 taxes owing if you meet all of the following criteria: If you qualify, you will not have to pay any interest on any amount owing from your 2020 taxes until April 30, 2022. *PLEASE NOTE* Late-filing penalties still apply! Make sure to file your tax return by the required due date or you will be charged a 5% late-filing penalty on top of what you already owe, plus an additional 1% for each month (up to a maximum of 12 months). This is a separate chargeable item from the interest relief component. For more information see HERE If you cannot pay your taxes in full, you can get information on how to make payment arrangements HERE
Interest relief only applies to your 2020 taxes owing and not on previous or other debts with the CRA.
If you feel that any of the above may apply to you, please don’t hesitate to reach out to us at admin@kassoc.ca and ask us if you are eligible. It’s better to ask and be told no than not to ask and miss a chance to claim!