Mortar board and a graduation diploma
.Are you confused about how to file taxes in 2021 due to COVID and various government introduced programs? Read our article!
Being on top of your taxes is an important step to understand and start building your financial fortress. Are you unsure of whether you need to pay back some of the COVID benefits you received or not? If you are self-employed, do you feel confused about how much to save up for your lump-sum payment? In this week’s Live at 5, we answered all your questions on how to file your taxes in 2021 with Rosanna Lamanna, CPA.
There are more things to consider this year with various benefits and funds that the government launched due to COVID. In addition, the nature of changing workspaces might change the eligibility criteria for some deductions. One of the deductions that might become easier to qualify for is the use of home office space. To be eligible to deduct a part of your rent as office space, your principal place of employment and client meetings needs to be your home. As most people fulfill these criteria this year due to self-isolation, more employees might be eligible to get office space deductions. However, there is a difficulty with the ease of filing these deductions. An employee needs their employer to fill the T2200 form to get these benefits, which might be difficult in large corporations.
The government has launched various benefits for both employees and employers, but awareness about their taxability is low. For example, the wage subsidy program and most other benefits ARE taxable. Additionally, some people received funds from programs they weren’t eligible for such as the CERB, which they will have to pay back this upcoming tax season. This might become a great challenge for individuals who don’t have enough savings to cover the amount they owe.
One of the most sought programs was the Canada Emergency Business Account (CEBA) where $10,000 will be forgiven if it’s paid back until December 2022. However, the portion of the loan received from CEBA that will be forgiven will be taxable when you file your taxes this year.
Reaching out to an accountant is the best resource to understand and optimize your tax returns. They can provide you with tax advice that is specific to your circumstances. However, if you still prefer to file taxes yourself, the CRA website is the best online resource to keep up to date with the latest news on the relief programs available.
Make sure to keep records of your documents and tax files because taxpayers might have a greater chance of getting audited this year as many people received benefits for programs they may not qualify for. However, don’t be afraid of audits! There is nothing to worry about as long as your supporting documents are easy to find. Rosanna mentioned that her clients are required to provide their back up documents when they file their taxes. This way, the firm can have them on hand should their clients get audited.
File your taxes even when you aren’t making an income. Not filing may prevent you from receiving income and benefits you might be entitled to, such as the GST and tuition credit.
If your business faced a loss this year but profited previously, you can carry back your losses to earlier years when you lost money and claim a refund of the taxes you paid. If you are self-employed, ensure you claim all possible expenses such as office space, internet, office supplies and others. However, not all expenses are eligible. Rosanna also recommended that self-employed individuals get in the habit of paying themselves a salary to create a reliable income stream and to build deductions.
It’s never too early to talk to your accountant about the upcoming year. If you plan ahead, you will have more opportunities to save on your taxes.
We hope you enjoyed reading our blog about ‘Minority Women during COVID’! Check the full live chat here. You can find our live chats and more of the latest financial news on our News Blog. Stay tuned to learn more tips on a new topic each week on our Instagram Live at 5 on Instagram! Aside from our live chats, we post daily financial updates on social media!
You can learn more about Rosanna and her services by clicking here.
Your browser does not support the video tag.
Your browser does not support the video tag.
Your browser does not support the video tag.
Your browser does not support the video tag.
Your browser does not support the video tag.
Your browser does not support the video tag.