Important COVID-19 Tax Changes You Need to Know

April 14th, 2021 post featured image

Whichever way you look at it, filing a tax return is complex. But add a global pandemic into the mix and a year later, “complex” now seems like a massive understatement. These are unprecedented times, especially where taxes are involved, so if there was ever a year to have a professional prepare your tax return, it’s this one.

If you received some kind of COVID-19 benefit and/or you had to start working from home last year because of the pandemic, the following are just some of the 2020 tax changes you should know about. For a more comprehensive list of changes, visit the CRA website.

1. Interest relief

At the beginning of February, the government announced interest relief on 2020 taxes owing for individuals who meet ALL the following criteria:

  • Your total 2020 taxable income was $75,000 or less
  • You received at least one COVID-19 benefit in 2020:
    • Canada Emergency Response Benefit (CERB)
    • Canada Emergency Student Benefit (CESB)
    • Canada Recovery Benefit (CRB)
    • Canada Recovery Caregiving Benefit (CRCB)
    • Canada Recovery Sickness Benefit (CRSB)
    • Employment Insurance (EI) benefits
    • Provincial or territorial emergency benefits
  • You filed your 2020 income tax and benefit return[1]

If you are eligible, the CRA will automatically apply interest relief on your 2020 taxes owing and you will have until the end of April 2022 to pay this balance. Keep in mind, this payment extension is NOT a filing extension.[2] You must still file your 2020 taxes by April 30, 2021 in order to avoid being charged a late filing penalty.

2. CERB repayment confusion

With the various emergency relief benefits announced in 2020 came convoluted repayment rules. Did the government mean “NET” or “GROSS” income? There’s been plenty of confusion about whether or not people need to pay back their benefit, especially if they were, for one reason or another, ineligible to have received it. On February 9, 2021, the government announced:

Self-employed individuals whose net self-employment income was less than $5,000 and who applied for CERB will not be required to repay the CERB, as long as their gross self-employment income was at least $5,000 and they met all other eligibility criteria.[3]

If you fall into this category and voluntarily repaid some of your CERB benefits during 2020, the government has agreed to return these amounts.

They will not however, allow people who would have fit into this category based on the “gross” revenue definition, to retroactively apply for CERB.

If you don’t fall into the aforementioned category, but you still received CERB and are wondering what you are required to repay, click here. Due to the complex nature of these repayment rules, we strongly advise you seek professional advice for help determining any amount owing.

3. Home office expenses deduction

This deduction is likely familiar to the self-employed who normally work out of a home office. In addition to seeking professional advice, they calculate their deduction using the ‘detailed method.’ To oversimplify, this method accounts for tracked expenses, office square footage (within the home) and employment use percentage of said space, among other things.

For those of us who suddenly had to work from home in 2020, CRA says you can calculate your home office expenses deduction using the new ‘temporary flat rate method.’ This method does not require you to track expenses, perform workplace calculations or keep receipts.[4]

You can claim up to a maximum of $400 per individual if:

  • You worked from home in 2020 due to COVID-19
  • You worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020
  • You are only claiming home office expenses and are not claiming any other employment expenses on line 22900
  • Your employer did not reimburse you for all your home office expenses[5]

Some things to note: even if you chose to work from home when you had other options, the CRA will still consider you to have worked from home due to the pandemic. Similarly, if your employer reimbursed you for some, but not all, of your home office expenses AND you meet the other eligibility criteria, you can still use the ‘temporary flat rate method’ to claim the deduction on your tax return. Click here for more information on how to do this.

Depending on your situation, filing your taxes this year might look very different from years previous and because of this, we highly recommend you consider seeking professional advice to ensure your taxes are done both properly and strategically.

Feel free to connect with us for clarity or to understand how some of the proposed changes may impact you.