COVID-19 and Taxes: Wasseem Dirani Explains What is Changing and What is Still in Effect
Tax time is upon us, but this year, filing one’s taxes is going to look a little different in Canada. Due to the different subsidies, tax credits, and benefits programs the federal governments introduced in 2020, people may be confused as to how to file their taxes this year.
Wasseem Dirani is a tax expert and the CEO of Hamilton, Ontario’s Taxes to Save. He provides some much needed information on what is changing and what is still in effect regarding your 2020 tax return.
Changes for Employees
If you were an employee who had to stop working in 2020 or who was forced to work less due to the pandemic, then you would have been eligible for the Canada Emergency Response Benefit (better known as CERB) and/or the Canada Recovery Benefit (CRB). If you took advantage of either of these benefits, then the amount received will be added to your total income on your tax return. Further, you will be required to note any CERB or CRB benefits you received on a separate form, called a T4A slip. Wasseem Dirani notes that depending on your circumstances, if you did take advantage of CERB or CRB, it is possible that you may owe taxes when you file a return. Thus, 2021 might be the first time for many that they actually owe money to the government after filing their return for the year prior.
Another change for employees relates to those who had to work from home due to the COVID-19 pandemic. CEO of Taxes to Save Wasseem Dirani asserts that the Canadian government has introduced two types of tax credits for those employees who were forced to work from home for at least four consecutive weeks because of the pandemic. The first option is a tax credit of $2 a day for each day that you worked at home, up to a maximum of $400. No additional documents are needed for this option, shares Dirani. The second option is to receive a tax credit based on your home expenses. This is the best option if you are certain you would be entitled to more than $400. For this option, you must ask your employer to provide you with a T2200S form, and when filling it out, you must remember that your eligible expenses are to be prorated based on their use for business purposes.
Changes for the Self-Employed
For people who are self-employed, there might be a few changes to your taxes this year. First, as a self-employed individual, you will be required to fill out (as you always must), the T2125 — Statement of Business or Professional Activities form. On this form, you will report all of your business’ expenses and income for the year, including everything from vehicle usage to capital costs. Any loss in your income in 2020, which will be the case for most businesses, reduces your tax liability. However, if you applied for CERB or CRB last year, then the income that came from either of the benefits will be added to your total income, increasing your tax liability. Further, There are two other wage subsidies that were made available by the federal government in 2020 and if they were taken advantage of by a business, then they are also to be added to your taxable income this tax season. These two subsidies are the Temporary Wage Subsidy (a three-month subsidy intended for the payment of source remittances), and the Canada Emergency Wage Subsidy (which supported businesses who experienced a 30% or more loss in revenue).
Overall, Wasseem Dirani warns that if you’re self-employed, it’s always important to keep a close record of all your expenses and income. However, this year it is more important than ever due to the various subsidies and benefits that many self-employed individuals took advantage of.
Lastly, one thing that isn’t changing this year is the due date for taxes. According to Wasseem Dirani of Hamilton, Ontario, individual tax returns and payments are due on April 30, while self-employed returns are due on June 15 of this year. While it is true that last year, due to the pandemic, the Canadian Revenue Agency extended the individual tax deadline to June 1, this year they have given no indication of doing the same.