What’s New in the Tax World?

What’s new in the Tax World?

An unthinkable year, 2020 was like no other. And as the Covid-19 pandemic continues to evolve, it has impacted individuals and businesses globally. Along with the significant impact, there are numerous tax issues you need to be aware of this year. We have outlined the key tax affairs for individuals as well as for the small corporations below:

Individuals:

Official tax slips for income, support and benefits received under COVID-19 relief program may have been issued for some, but not all. Some of these benefits are taxable while others are not. Here is the summary of taxable and non-taxable Covid-19 support programs:

Name of program

Taxable?

Canada Emergency Response Benefit (CERB)

Yes

Employment insurance (EI)

Yes

Canada Recovery Benefit (CRB)

Yes

Canada Recovery Sickness Benefit (CRSB)

Yes

Canada Recovery Caregiving Benefit (CRCB)

Yes

Canada Emergency Student Benefit (CESB)

Yes

One-time payment – disability support

No

One-time payment – GST/HST credit

No

One-time payment – Canada Child Benefit

No

One-time payment – OAS/GIS

No

Are you working from home? Or did you work from home in the early months of 2020? 🏡 here is an important update for you. CRA has released its "2020 home office expenses for employee’s guidelines"

You can choose one of the two options:

  • Flat rate method - is available for those who worked from home more than 50% of the time for at least 4 consecutive weeks in 2020 due to COVID-19, and were not reimbursed for their expenses. Employees can claim a flat amount of $2/day to a maximum of $400. Please provide the number of days you worked from home if you met this test. No employer certification or supporting documentation are required.
  • Simplified detailed method – for employees who want to claim actual home office expenses supported by receipts. Employer certification is required. Please provide details on the portion of your home that was used as a workspace. If the space was not used exclusively for employment purposes, provide the approximate employment related time.

The requirements for employees claiming employment expenses other than home office expenses (e.g. motor vehicle costs) are unchanged.

For self-employed individuals, here is the list of Covid reliefs that are available to you:

Federal government support for business and rental income:

Name of program

Taxable?

Canada Emergency Wage Subsidy (CEWS)

Yes

Canada Emergency Rent Subsidy (CERS)

Yes

Canada Emergency Business Account (CEBA)

Yes

The forgivable portion of the interest-free loan under the CEBA is taxable in the year the loan is received.

It’s time to prepare for your Tax Return…

Most of the tax slips distributed by early March. However, a deadline for issuing some investment slips, such as T3 and T5013, is at the end of March.

In addition, here is the comprehensive list of new releases from CRA:

  • Canada Training Credit (CTC) – refundable tax credit available for eligible tuition associated with work- related training for individuals aged 25 to 64 years old at the end of the year. The maximum credit in 2020 is $250. Eligible individuals will accumulate $250 each year up to a maximum amount of $5,000 over a lifetime. Foreign educational institutions are not eligible for this credit.
  • The digital news subscription tax credit is a non-refundable tax credit for up to $500 paid by individuals after 2019 and before 2025 to a qualified Canadian journalism organization.
  • CRA increased the rate for meal expenses from $17 to $23 per meal. The increase is retroactive to January 1, 2020

While listed below are some more exciting releases for residents of Saskatchewan:

  • Saskatchewan Home Renovation Tax Credit – non-refundable tax credit will provide a credit on up to$20,000 of eligible home renovation expenses to a Saskatchewan taxpayer’s principle residence located in SK. Eligible expenses must be incurred between October 1, 2020 and December 31, 2022. Tax credit can be claimed on 2021 and/or 2022 tax returns.
  • Saskatchewan volunteer firefighters, search and rescue volunteers, and volunteer emergency medical first responders tax credits are non-refundable tax credits of $3,000 and can be claimed if you completed at least 200 hours of eligible services.

Do you participate in the sharing economy arrangements?

  • Are you renting part or all of your property for a short period through Airbnb or VRBO? You have to report it as rental income on your tax return. You may have to register and start collecting GST/HST.
  • Are you providing ride sharing services (Uber)? It is taxable business income. You are required to charge GST/HST and remit to the CRA. The $30,000 “small supplier” threshold is not applicable to taxi services.

Small Businesses:

CEBA (Canada Emergency Business Account)

Interest-free loans for small businesses and not-for-profits

CEWS (Canada Emergency Wage Subsidy)

Help for businesses to keep or rehire employees

CERS (Canada Emergency Rent Subsidy)

Rent and mortgage support for qualifying organizations affected by COVID‑19

BCAP (Business Credit Availability Program)

Credit to help cover operating costs due to COVID‑19

HASCAP (Highly Affected Sectors Credit Availability Program)

Low-interest loans to cover operational needs for hard-hit businesses

Canada Emergency Business Account (CEBA)

As of December 4, 2020, CEBA loans for eligible businesses will increase from $40,000 to $60,000.

Applicants who have received the $40,000 CEBA loan may apply for the $20,000 expansion, which provides eligible businesses with an additional $20,000 in financing.

The deadline is March 31, 2021, to apply for $60,000 CEBA loan or the $20,000 expansion.

 The CEBA has two streams of eligibility: the Payroll stream and the Non-Deferrable Expense stream. These loans are government-funded, interest-free (if repaid before Dec 31, 2022) and provided through financial institutions in co-operation with Export Development Canada (EDC).

Those who have previously received the loan of up to $40,000 can apply for the CEBA expansion to increase their loan by an additional $20,000 with an additional $10,000 forgivable portion (if repaid before Dec 31, 2022) after self-attesting to having experienced a revenue drop.

Canada Emergency Wage Subsidy (CEWS)

The Canada Emergency Wage Subsidy (CEWS) is a wage subsidy program offered until June 2021 to qualifying employers who have seen a decline in revenue due to COVID-19. CEWS is intended to prevent more job losses by helping employers keep their employees on payroll, and to enable employers to re-hire workers, facilitating a return to normal operations. If you qualify for CEWS, you will receive a percentage of your employees’ pay subsidized based on your revenue decline compared to pre-Covid.

For more details on the CEWS click here

Canada Emergency Commercial Rent Subsidy (CERS)

Canadian businesses, non-profit organizations, or charities who have seen a drop in revenue due to the COVID-19 pandemic may be eligible for a subsidy to cover part of their commercial rent or property expenses, starting on September 27, 2020, until June 2021. This subsidy will provide payments directly to qualifying renters and property owners, without requiring the participation of landlords.

Click here to check if you are eligible for the base subsidy, and you may also qualify for lockdown support if your business location is significantly affected by a public health order for a week or more.

If you owe taxes to CRA and are overwhelmed with paying it back, contact Bromwich+Smith and ask us your questions, or book your consultation today. Our Debt Relief Specialists are available by phone at 1.855.884.9243 or you can request a call back via our contact us page. There is no need to travel to a local office. Licensed Insolvency TrusteeBromwich+Smith, is now offering video appointments, with all services available from the comfort of your home.

References

Canada, G. o. (2020, 12 08). What’s new for the 2020 tax-filing season. Retrieved from https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips…

Canada, G. o. (2021, 02 19). Canada Emergency Business Account (CEBA). Retrieved from https://ceba-cuec.ca/

Saskatchewan, G. o. (2021, 02 22). Covid-19 Economic Response Plan - Individuals & Businesses. Retrieved from https://www.canada.ca/en/department-finance/economic-response-plan.html

Saskatchewan, G. o. (n.d.). Tax Credits. Retrieved from https://www.saskatchewan.ca/residents/taxes-and-investments/tax-credits

By Sandra Jackson CPA Prof. Corp.

Sandra worked for CRA and Tax Preparation Services.  She loved it so much she bought the practice in 1999. Sandra specializes in corporate financial statements, tax preparation & planning, estates, trust taxes and small to medium size businesses.  Sandra loves camping, traveling and live theatre.  Sandra is a preferred referral partner of Bromwich+Smith

February 23, 2021
Website: sandrajacksoncga.com
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