COVID-19 could affect your tax season, says expert

Tax season may look a little different this year because of COVID-19. 

From people who claimed CERB, to those who spent much of 2020 working from home, there are some things to keep in mind while filing taxes this year.

Lisa Gittens is a senior tax professional with H&R Block. She spoke to Portia Clark of CBC's Information Morning on Thursday and answered questions about what taxpayers should keep in mind this year.

Here is that conversation, edited for clarity and length.

Q: How are those who were on CERB going to be taxed?

A: The Canada Emergency Response Benefit was paid out to close to nine million Canadians in 2020. This is taxable income for all of those who received it, and we know that no income tax was deducted at source, which means when you file your return you can expect to see tax owing when you come to the final pages. The way to avoid that is to make sure you're claiming all of the credits and deductions that you are entitled to in 2020.

The other benefits were the Canada Recovery Benefit, the Canada Recovery Sickness Benefit and the Canada Recovery Caregiving Benefit. These three benefits, as well as the Canada Emergency Student Benefit, are taxable and have 10 per cent tax withheld at source.

Q: Could these actually put someone into a different tax bracket? Is that something people need to look for?

A: That is correct. Because all of the benefits are taxable, when you add that to any income that you did earn in the year, you potentially go from the lowest federal tax bracket, which is 15 per cent, to a higher bracket, which could be 20 per cent. 

For the benefits that we mentioned — the recovery benefits and the student benefit, where 10 per cent tax was withheld — your federal tax is 15 per cent. So you're seeing there may be that five per cent extra you pay when you file your tax.

Q: Some are suggesting the tax on CERB and some of these other programs should be forgiven. If you wait around and stall on paying your taxes, what happens?

A: There's no indication the debts will be forgiven, but, potentially, any interest in penalty would not be applied. This is for those who received the benefit in good faith — maybe there was some confusion over net or gross [income], or they applied through Canada Revenue and Service Canada, so they got a double payment.

Ideally, if you paid it before Dec. 31, then all you would be subject to is the tax on the payments you actually received. If you didn't repay it by Dec. 31, on Jan. 12, Revenue Canada started to mail out T4A slips which showed the amount of the benefit you received in 2020 and if any tax was deducted. So it's important that those T4A slips are claimed when you file your tax return.

Q: We've also been hearing stories about people who got the government aid, who weren't eligible for it which means they have to pay back the full amount. If they're not able to pay it back, what happens?

A: Again, if you were not able to repay in by Dec. 31, file your 2020 taxes using the T4A that was mailed out to you by Revenue Canada. You will be subject to some extra taxation. But Revenue Canada indicated that they would be working with individual taxpayers, and they may have those overpayments adjusted after filing the 2021 returns. 

So the thing here for Canadians to take away is with these emergency response benefits, it is important that you file your 2019 and 2020 taxes, and prepare to file your 2021 taxes. That gives Revenue Canada a full picture of the last three years, and they will be able to work with you as an individual, put you on a payment plan, and cancel and adjust any extra payments.

Q: If you've been working from home instead of going into the office, can you claim for your lights, your utilities, some of the space? How do you go about doing that if you haven't done that before?

A: So, brand new for this tax season, is the simplified work-from-home deduction. It's a flat rate deduction. The maximum deduction is $400. You simply fill out the T777S. It says: Were you working from home more than 50 per cent of the time due to COVID? Did you work for four consecutive weeks? That's a yes or no, and then you save two dollars a day, for a maximum of 200 days, which gives you a flat deduction of $400. Claiming that deduction could possibly bring you from one tax rate into a lower tax rate.

The second option is a detailed method. If your expenses exceed $400, claim your workspace from home expenses. Based on the square footage you use in your home — let's say it's 10 per cent — you're able to claim 10 per cent of your rent, 100 per cent of any supplies you purchased (hand sanitizer, paper, toner, pens and pencils) as well as your utility bills. Even if the utility bills are part of your condo fees, you claim a part of your utility bill that pertains to your workspace. No furniture, no equipment.

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