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? Do you know of the tax credit and breaks you can claim? We interviewed Rosanna Lamanna on our Instagram Live at 5 to get answers to all questions about tax filing for the 2020 tax season!
What are some changes to tax credits, claims and rules for the 202 tax season?
Fortunately, there are some positive changes to tax filing this year. Individuals who have a taxable income of $75,000 or less, or received any government funding in 2020 will get a one-year extension on when they need to pay their taxes. However, the deadline to file taxes doesn’t get this extension. For individuals who are struggling to pay their taxes, CRA has payment plans to help you with your tax payments.
One of the biggest changes in tax filing this year is the ability to claim your business use of your home office. If you worked from home last year due to COVID, you can claim some tax breaks for each day you worked from your home office. However, you need to keep detailed receipts and might need your employer to send you some files to qualify for these tax breaks. If you rent your home office, you can seek the detailed version of applying for this tax break as your increased expenses might qualify you to get greater returns.
How will the government benefit programs like CERB and CEBA impact your tax filing?
If you received any funds from the government, you will receive a T4 slip indicating the amount of funding you’ve received. This funding is taxable, so depending on your total income you might have to pay taxes off the benefits you received. If you received CEBA, you may need to pay tax off the forgivable portion of the fund the year you receive it despite its forgivability. If you received the initial 40,000, you might need to pay taxes off the $10,000 forgivable portion. If you applied for the additional $20,000 after the CEBA expansion, you might have to pay tax off the $20,000 forgivable portion.
What if your business is no longer eligible for the funds you received earlier?
If your corporation took advantage of the wage subsidy, you needed to file a PED27 form to the government to ensure your eligibility. Although the deadline to file this form has passed, you should still file it to avoid further complications. If you weren’t eligible based on the form you need to submit, you may need to pay back the funds you received in your tax returns.
When should you reach out to a tax professional?
Since there are different deadlines for different tax purposes, make sure to keep in consistent touch with your tax professional instead of waiting for the tax season. Leaving your tax planning to the tax season might create complications as there will be more to cover and you may have missed some deadlines you weren’t aware of.
Our advice for tax filing:
- Reach out to your tax professional more than once a year to have an ongoing understanding of your taxes and the changing rules
- Keep detailed filing of your receipts to ease tax filing and increase your chances of qualifying for tax breaks
- If you want to align your tax strategy with your financial goals, book your complimentary 30-minute phone consultation with our team to start your financial planning journey!
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