What you need to know about filing your 2020 taxes
As the world moves into the second year of a global pandemic, and as many of us continue to deal with what has probably been the most uncertain time in our life, there is one thing that remains the same: spring is tax season.
Navigating around the ins and outs of filing your taxes can be exhausting at the best of times. Doing your taxes while (still) in a pandemic can overwhelm even the most seasoned tax preparers.
While new government supports were meant to bring relief to struggling Canadians and businesses, unfortunately they have also brought new tax implications you need to understand when you file for 2020. Here are a few things you should be aware of:
Deadlines
It’s important to know that, even though we are still in a pandemic, we don’t have the same extended deadlines that Canada Revenue allowed last year.
· April 30: personal income tax. Last year, you could wait till the end of June.
· June 15: self-employed. That’s the same as last year, but for your 2019 taxes, you could file as late as September and not face any penalties. No such luck this year. And if you owe tax, you’ll have to pay interest on the balance owing as of April 30.
· Corporate tax returns are due six months after the corporation’s fiscal year-end. If your incorporated business has a balance it still needs to pay, you have until two months after the end of your fiscal tax year to pay it off.
Last year, the federal government provided some much-needed relief for workers and businesses struggling during through COVID-19 restrictions. It also brought new rules that may have implications when filing your taxes. Here is what you might need to know.
Canada Emergency Business Account (CEBA)
CEBA provided an interest-free loan of up to $60,000 to small businesses, the self-employed and nonprofits to help cover operating costs and avoid closures during the pandemic. Applicants had until March 31, 2021 to apply for the loan.
If a business pays back the loan before Dec. 31, 2022, 33 per cent of that load -- up to $20,000 -- will be forgiven. Don’t worry about it this year; the loan has no implications for your 2020 tax return.
Canada Emergency Commercial Rent Assistance (CECRA)
Small business owners who were having trouble paying their commercial rent in 2020 could apply for CECRA and have rent reduced by at least 75 per cent between April to September 2020. The tenant paid 25 per cent, the property owner forgave another 25 per cent, and the CECRA paid the remaining 50 per cent.
If you were part of this program, you need to report the reduced rent amount on your small business tax return, not what you would have paid without the program.
Canada Emergency Rent Subsidy (CERS)
CERS replaced CECRA in September 2020. The new program, which runs until June 2021, provided business owners, nonprofits or charities that saw less revenue during the pandemic with a subsidy to cover part of their commercial rent or property expenses. Unlike CECRA, funds go directly to business owners, not landlords.
You must include the amount of CERS you received on your tax return when calculating your taxable income.
Canada Emergency Wage Subsidy (CEWS)
This is a taxable benefit available to employers who saw a drop in revenue due to COVID-19. It covers part of their employee wages retroactive to March 15, 2020.
CEWS is taxable and you must include the amount of CEWS you receive as taxable income on your corporate income tax return.
Canada Emergency Response Benefit (CERB)
CERB provided support to employed and self-employed Canadians who were directly affected by COVID-19 between March 15, 2020 and September 26, 2020.
If your business closed due to the pandemic, you were eligible to receive this support; so were independent contractors and self-employed people if COVID-19 affected their ability to work.
CERB is taxable, so you must report it as income when you file your 2020 income tax.
The pandemic brought about other programs that might affect you when you file your taxes for 2020. For more information, visit the business section on the CRA website.
Resources:
https://fbc.ca/blog/what-you-need-know-about-small-business-tax-filing/
https://www.freshbooks.com/blog/2021-small-business-tax-return