How the COVID-19 pandemic could impact your income tax returns
KITCHENER -- Changing workflows over the course of the COVID-19 pandemic could have an impact on how to file your taxes for 2020.
Associate Accounting Professor at the University of Waterloo Andrew Bauer says he is often asked the same question: “I am working from home, do I get a deduction?”
Bauer, who is also the Canada Research Chair in Taxation, Governance and Risk, said there are three ways your tax filing may be impacted this year.
“One is when you have to pay. Another is a deduction that’s available for those working at home and the third one is the taxability of the benefits that were received in 2020 because of the emergency response," Bauer explained.
IF YOU WERE WORKING FROM HOME
Bauer says for those temporarily working from home, claims can be made in two ways.
The first one is a simplified option.
"Basically it says you can take a deduction of $2 a day for up to 200 days in a year," he said.
He added this only applies if you have worked at least 50 per cent of your time from home for at least four consecutive weeks of the year.
“Anyone who has been working at home in Ontario since the original shut down back in March of 2020 will probably get most of those 200 days," Bauer said. "So you’re talking about a $400 deduction you wouldn’t normally have, that’s pretty good.”
Option number two for those working from home is to break down each expense.
”You have to total up all of your eligible expenses, which is basically your utilities, your internet and then if you’re a renter, your rent," Bauer said. "Then you multiply that by the portion of the home that you use for your work, times the amount of time that you’re at home.”
Bauer says the latter option may be more beneficial for renters of smaller homes or apartments, considering a bigger portion of the living space can be called a work space. For homeowners, he says they likely aren’t using enough space within their home as an office to benefit from this option.
“For homeowners, when you can’t count mortgage interest and you can’t count home insurance or property taxes there’s not a lot left over, so the simplified method is probably the way to go," he said.
IF YOU RECEIVED EMERGENCY OR RECOVERY BENEFITS
For those who received emergency government assistance in 2020, Credit Canada Communications Manager Adriana Molina says it’s important to know each is treated and taxed differently.
“The first benefit that went out, which was CERB, [Canada Emergency Response Benefit] that one was not taxed at the source which meant that the government didn’t hold back any of the taxes and the consumer, the Canadian is responsible for paying that portion,” she said.
“The second one that went out was CRB, the Canada Recovery Benefit. That one was taxed at the source but only 10 per cent so depending on how much income you earned throughout 2020, you may have to owe a bit of taxes on that as well.”
Bauer says the good news is, the deadline for certain payments has been extended.
“If you have taxable income of $75,000 or less and you received one of the taxable incomes during the year, then you don’t have to pay any tax owing until April 30th of next year, 2022, so that's different," Molina said. "Usually you have to pay whatever you owe by your filing date.”
Molina’s advice is that if you do owe money, it’s best to plan ahead.
“Get your taxes done early," she said. "That way at least if you do owe, you can start planning your budget accordingly to pay.”
The deadline for the general public to file taxes is April 30. For those who are self-employed the deadline is June 15.