As we head into the first complete tax season following the onset of the pandemic, we’d like to provide some tips to help you potentially maximize your deductions and stay onside with the Canada Revenue Agency (CRA).
Tax Tip #1: Claim administrative relief if you were an employee working from home in 2020
If you worked from home during 2020 as a result of pandemic health guidelines, you may be able to claim employment expenses. There are two options available:
1. New – Temporary Flat Rate method – Canadian employees can claim a flat amount of $2/day to a maximum of $500. No employer certification is required. You must also demonstrate you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020. You cannot claim any other employment expenses if you choose this method. This calculation is ideal for taxpayers looking for a straightforward approach to claiming the deduction.
2. Simplified method – This option may be a better choice for employees who accrued significant expenses when they shifted to at-home work. The simplified method requires you to claim actual expenses related to working from home and must be certified by your employer. We advise that you keep records of the days that you have been required to work from home and any receipts/invoices to support your expenses in case CRA asks.
Tax Tip #2: Use the Benefits Finder Tool to track down and make sure you’re applying for all benefits you’re eligible for
The Government of Canada’s Benefits Finder Tool is a great way to discover any government benefits that you may qualify for, especially if you don’t have the time to read all the rules surrounding numerous programs.
Tax Tip #3: Invest in your children’s future – tax-free!
Did you know that an RESP (Registered Educational Savings Plan) allows you to save and invest for your children’s future tax-free? When you contribute to an RESP, the government will match it with 20% of your deposit up to $500 per year (Max $7,200 per child). Talk to your bank to learn how to set this up.
Tax Tip #4: Take advantage of the Home Accessibility Tax Credit if you qualify
You can potentially get a tax credit for upgrades in your home that make it easier to navigate or reduce the chance of injuries such as chair lifts and wheelchair ramps. You can claim up to $10,000 of eligible home improvements per year and receive 15% back on your tax return as a credit.
Tax Tip #5: Claim credits for the cost of work-related training
Starting in 2020, the Canada Training Credit will start building $250 per year (Lifetime maximum $5,000) that will reimburse up to half of eligible tuition and fees associated with work-related training. In order to be eligible, you must:
● File a tax return in the previous year
● Be at least 25 years old
● Have earnings of $10,000 or more in the previous year
The credit will first be added when the tax return has been filed for 2019 with the eligible expenses in the 2020 taxation year.
Tax Tip #6: Claim six fully deductible meals
You are normally allowed a 50% deduction for tax purposes for meals and entertainment when expensing these for your business. However, when there are meals and entertainment expenses incurred for events such as a Christmas party or other event that all employees can attend, CRA will allow you to take 100% for tax deductions for the year.
We advise you to keep track of these six events separately from other meals and entertainment expenses if CRA asks.
Tax Tip #7: Pool your Charitable Tax Credit
Pooling your donations is a great way to maximize your returns, especially in years when you are earning a much higher income. You can deduct any donations made in the previous five years that were unclaimed at a higher rate if the total combined amount is greater than $200.00 (15% on the first 200 and 29% on any amount after). Just a word of caution, this is a non-refundable tax credit and can only be used to reduce taxes owed in the year the credit is claimed. If you don’t owe any tax, you don’t get a refund.
Know your taxpayer rights
Not a tip, but a reminder of what you can expect from the CRA. Every Canadian taxpayer is protected by the Taxpayer Bill of Rights for Fair Treatment and Professional Service from CRA. If you believe that your service rights were not respected, we recommend the following:
1. Attempt to resolve the issue directly with the CRA employee or their supervisor.
2. File a complaint with the CRA’s service feedback program RC193 Service Feedback.
3. Escalate this issue to Taxpayers’ Ombudsperson by filling out this form and sending it by mail.
While processing delays and errors can occur, you can expect respectful treatment from CRA employees and seek resolution if you feel that you didn’t receive it.
If you have any questions or need more information, feel free to contact us and we’d be happy to help you.