As we head into the 2021 tax season, we’d like to provide some tips to help you 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 2021!
If you worked from home during 2021 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 2021. 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.
Employees can now claim up to $500 non-taxable for office equipment if the employer reimburses them for it. Keep in mind documentation is required, as well as an employer signature on the T2200 form. (Any excess beyond $500 is taxable)
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 make sure you’re applying for all the 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
You can potentially get a tax credit for upgrades in your home that make it easier to navigate or reduce the chance of injury. This includes things 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.
As of last tax season, 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 2020 with the eligible expenses in the 2021 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: Salary bonuses at year-end
Sometimes it may be advantageous for a business owner to declare income in one year over another due to an individual not making as much money in the previous year compared to the next.
Salary bonuses can be declared at the financial year-end of a company, but sometimes the business does not have the necessary cash flow. With a bonus declared, the company does not have to pay the bonus until 180 days later (or 6 months).
This allows for some cash flow planning and flexibility while the company shores up its financial burdens. However, it is important to note that remittances to CRA must be paid at the time the bonus is given out to the employee(s).
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:
While processing delays and errors can occur, you can expect respectful treatment from CRA employees, and you should seek a resolution if you feel that you didn’t receive it.
When undergoing an audit by CRA, the auditor requires you to provide a waiver to allow CRA to audit you.
Once you provide this waiver, immediately revoke it to give CRA 6 months to finish their audit and limit it to the specific items that they are auditing (Such as travel, meals, etc).
This prevents CRA from going down the rabbit hole and continuously keeping you in an audit.
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