Year End Tax Tips & Relief Programs Update

Wow! I can’t believe December is just around the corner. The leaves have been raked, the garden put to bed and it’s time to bring out the cozy socks!

As this challenging and eventful year draws to a close, I want to provide you with updates regarding Covid relief programs and tax implications, as well as some year end tax tips.

In each section where appropriate, I have provided links for further information. If the link is blocked by your anti-virus software, please see the key words after each link and type those into your search engine to access the relevant web page.

I have highlighted the main Covid relief programs. The following link to the Government of Canada website details Canada’s COVID-19 Economic Response Plan in full:
https://www.canada.ca/en/department-finance/economic-response-plan.html (key words: Canada covid response)

Quick reference guide:
1. CERB (Canada Emergency Response Benefit) (program closed but can apply retroactively)
2. Canada Recovery Benefit (CRB) (new program)
3. Canada Recovery Caregiving Benefit (CRCB) (new program)
4. Canada Recovery Sickness Benefit (CRSB) (new program)
5. One-time payment to persons with disabilities
6. One-time tax-free payment for seniors
7. Employees working from home
8. Canada Emergency Wage Subsidy (CEWS)
9. Canada Emergency Business Account (CEBA)
10. Canada Emergency Rent Subsidy (CERS) (new program)
11. Interactive Tool for Financial Assistance for Businesses
12. Capital Gains and Losses
13. RRSP Contributions
14. Tax Free Savings Account (TFSA)
15. Home Accessibility Tax Credit (HATC) and New Ontario Senior’s Home Safety Tax Credit (SHSTC)
16. Donations
17. Accelerated depreciation (business expense)
18. Zero-emission vehicles
19. Director Liability – need to know for company owners and board members
20. Passwords and Identity Theft

COVID RELIEF BENEFITS FOR INDIVIDUALS

1. CERB (Canada Emergency Response Benefit) (program closed but can apply retroactively)
Even though the CERB has ended, the CRA is continuing to accept and process retroactive applications until December 2, 2020. The Canada Emergency Response Benefit (CERB) gives financial support to employed and self-employed Canadians who are directly affected by COVID-19. If you are eligible, you can receive $2,000 for a 4-week period (the same as $500 a week).
https://www.canada.ca/en/services/benefits/ei/cerb-application.html (key words: benefits cerb application)

CERB is Taxable

The CERB is taxable. You will receive a 2020 T4A tax slip reporting the amount of CERB paid to you. No tax was deducted at source from the CERB payments, so if you received CERB, make sure you set some money aside to cover the taxes in April.

CERB Repayment
If you received a CERB payment to which you were not entitled, pay back the amount before December 31, 2020. This will ensure that the correct amount is reported on the 2020 T4A.

2. Canada Recovery Benefit (CRB) (new program)
The Canada Recovery Benefit (CRB) gives income support to employed and self-employed individuals who are directly affected by COVID-19 and are not entitled to Employment Insurance (EI) benefits. The CRB is administered by the Canada Revenue Agency (CRA).

If you are eligible for the CRB, you can receive $1,000 ($900 after taxes withheld) for a 2-week period.

If your situation continues past 2 weeks, you will need to apply again. You may apply up to a total of 13 eligibility periods (26 weeks) between September 27, 2020 and September 25, 2021.

There is a 10% withholding tax on the CRB, and there is also a pay back calculation if your total income in 2020 exceeds $38,000 (excluding CRB income).
https://www.canada.ca/en/revenue-agency/services/benefits/recovery-benefit.html (key words: cra benefits recovery)

3. Canada Recovery Caregiving Benefit (CRCB) (new program)
The Canada Recovery Caregiving Benefit (CRCB) gives income support to employed and self-employed individuals who are unable to work because they must care for their child under 12 years old or a family member who needs supervised care. This applies if their school, regular program or facility is closed or unavailable to them due to COVID-19, or because they are sick, self-isolating, or at risk of serious health complications due to COVID-19. The CRCB is administered by the CRA.

If you are eligible for the CRCB, your household can receive $500 ($450 after taxes withheld) for each 1-week period.

If your situation continues past 1 week, you will need to apply again. You may apply up to a total of 26 weeks between September 27, 2020 and September 25, 2021.
https://www.canada.ca/en/revenue-agency/services/benefits/recovery-caregiving-benefit.html (key words: cra recovery caregiving)

4. Canada Recovery Sickness Benefit (CRSB) (new program)
The Canada Recovery Sickness Benefit (CRSB) gives income support to employed and self-employed individuals who are unable to work because they are sick or need to self-isolate due to COVID-19, or have an underlying health condition that puts them at greater risk of getting COVID-19. The CRSB is administered by the CRA.

If you are eligible for the CRSB, you can receive $500 ($450 after taxes withheld) for a 1-week period.

If your situation continues past 1 week, you will need to apply again. You may apply up to a total of 2 weeks between September 27, 2020 and September 25, 2021.
https://www.canada.ca/en/revenue-agency/services/benefits/recovery-sickness-benefit.html (key words: cra recovery sickness)

5. One-time payment to persons with disabilities
The government has issued at the end of October 2020 a non-taxable, non-reportable, one-time payment that provides up to $600 in recognition of the extraordinary expenses incurred by persons with disabilities during the COVID-19 pandemic.

Please see the following link for the details of the payments for people in different situations (seniors, parents of disabled children)
https://www.canada.ca/en/services/benefits/covid19-emergency-benefits/one-time-payment-persons-disabilities.html (key words: one time payment disability)

If you are eligible for the Disability Tax Credit but have not applied for it, you have to December 31, 2020 to make the application to qualify for the payment. If the application is accepted, CRA will issue the payment.

6. One-time tax-free payment for seniors
The payment for seniors provides support through a one-time payment: $300 for seniors eligible for the Old Age Security pension, and an additional $200 for seniors eligible for the Guaranteed Income Supplement
https://www.canada.ca/en/services/benefits/publicpensions/notice-covid-19/one-time-payment.html (key words: one time payment seniors)

7. Employees working from home
If you were required to work from home during COVID-19 you may be able to deduct home office expenses against your employment income. Under the regular income tax rules, for an employee to claim employment expenses, the employee must obtain form “T2200 Declaration of Conditions of Employment” from their employer. CRA acknowledged that it would be onerous to ask employers to complete the T2200 for employees that will only have home office expenses because of COVID-19.

One possibility is to have a T2200 Short Form, “Declaration of Conditions of Employment for Working at Home During COVID-19”. CRA has made public a draft of this form. I have provided some information below, but keep in mind CRA may take another route for employees to claim home office expenses.

In the draft of the T2200 Short, the conditions of employment are:
Did this employee’s contract of employment require them to pay their own home office expenses while carrying out their duties of employment? (Note that a formal contract is not required. A verbal agreement between the employer and employee will be accepted.)

Was this employee required to work from a work space in their home for one or more periods of four continuous weeks or more in 2020 during COVID-19?

Did this employee’s contract of employment require them to pay for supplies that they used directly in their work (stationery, ink cartridge, postage, use of cell phone)

The home office expenses are limited to: utilities, regular home maintenance, rent, supplies used directly in your work excluding capital items such as office furniture or computers.

Note that if you are also required to travel under your contract of employment, you need to have the regular T2200 completed by your employer and fill out the appropriate worksheet.

In February, in my tax letter, I will provide links to worksheets for employment expenses.

COVID RELIEF BENEFITS FOR BUSINESSES

8. Canada Emergency Wage Subsidy (CEWS)
Employers who have seen a drop in revenue due to COVID-19 may be eligible for a subsidy to cover part of their employee wages, retroactive to March 15, 2020. The CEWS program has been extended to June 2021.
https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy.html
(key words: cra cews)

The CEWS calculations are quite involved, here is an additional resource:
https://logankatz.com/covid-19/#1587481960273-81a438f7-42ac (key words: logan katz covid)

9. Canada Emergency Business Account (CEBA)
CEBA is intended to support businesses by providing financing for their expenses that cannot be avoided or deferred as they take steps to safely navigate a period of shutdown, thereby helping to position businesses for successful relaunch when the economy reopens.

Businesses have until December 31, 2020 to apply for CEBA. Note that the funds must be in the bank account by December 31, 2020. i.e. it is not sufficient to have access to the line of credit.

The CEBA application process follows one of two streams: (i) the Payroll Stream (Applicants with employment income paid in the 2019 calendar year between $20,000 and $1,500,000) or (ii) the Non-Deferrable Expense Stream (Applicants with $20,000 or less in total employment income paid in the 2019 calendar year).
https://ceba-cuec.ca/ (key word: ceba)

10. Canada Emergency Rent Subsidy (CERS) (new program)
On October 9, the government proposed the new Canada Emergency Rent Subsidy to provide direct relief to businesses, non-profits, and charities that continue to be economically impacted by the COVID-19 pandemic. The new rent subsidy would be available retroactive to September 27, 2020, until June 2021.

This program covers commercial rent and commercial mortgage insurance.

The application portal opens on November 23, 2020. Login into your CRA Business Account to apply.

This program is for qualifying organizations that have experienced a drop in revenue.
https://www.canada.ca/en/department-finance/news/2020/11/canada-emergency-rent-subsidy.html (key words: cra cers)

11. Interactive Tool for Financial Assistance for Businesses
This interactive tool allows the user to answer questions based on their circumstances and then lists the programs that may be available for business.
https://innovation.ised-isde.canada.ca/s/?language=en_CA (keys words: canada innovation financial assistance)

YEAR END TAX TIPS

12. Capital Gains and Losses
Now is a good time to review your non-registered investment activity to see if you have any capital gains that you may wish to offset by selling investments with accrued losses. The settlement must take place in 2020, so the trade date must be no later than December 29, 2020.

13. RRSP Contributions
Contribute by March 1, 2021 to deduct the RRSP on your 2020 tax return. If you have excess funds but do not need the deduction, you can still make a contribution but save the deduction for a future year, this way your funds can start growing now on a tax deferred basis.

Home buyer’s plan – make your minimum repayment to your RRSP by March 1, 2021.

Spousal RRSPs – if both spouses are contributing, consider just having one spouse contribute in each of your RRPSs if he or she is in the higher tax bracket and has the deduction room.

14. Tax Free Savings Account (TFSA)
The amount you can contribute to your tax-free savings account effective account January 1, 2021 is $6,000. If you have never contributed to your TFSA, the total amount you could contribute as of January 1, 2021 is $75,500.

Overcontributed? There are penalties for over contributing so make sure to track your contribution especially if using more than one financial institution.

15. Home Accessibility Tax Credit (HATC) and New Ontario Senior’s Home Safety Tax Credit (SHSTC)
The HATC is a federal credit where seniors and persons with disabilities may be able to claim renovations that allow them to be mobile or functional within the dwelling or that reduce the risk of harm to individual within the dwelling or in gaining access to the dwelling. The maximum claim is $10,000, and the tax savings is 15% of the claim.
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-31285-home-accessibility-expenses.html#hwtclm (key words: cra hatc)

The 2020 Ontario budget proposes new tax relief to help seniors live safely at home longer through the new Seniors’ Home Safety Tax Credit for the 2021 taxation year, providing a 25 per cent credit on eligible renovations of up to $10,000.
https://www.bakertilly.ca/en/btc/publications/taxflash-2020-ontario-budget-tax-changes (key words: bakertilly ontario budget changes)

If you are a senior and plan to make improve your home’s accessibility, you could save up to $4,000 on a maximum claim of $10,000 starting in 2021.

16. Donations
Make sure your favorite charities receive your donations in time to issue a receipt for 2020. In Ontario, the tax savings on donations after the first $200 is 42% of the donation amount. In British Columbia, the tax savings on donations after the first $200 is 45% of the donation amount.

If you are selling a public traded security that has a gain and also making a charitable contribution for a similar amount, consider donating the security directly to the charity. There is a special 0% inclusion rate for the capital gain, and you will receive a donation receipt for the market value of the security.

17. Accelerated depreciation
If you need a new computer or furnishings for your business, you will be able to claim an enhanced deduction.

Capital cost allowance (i.e. depreciation on assets such as vehicles, computers, etc.) will be enhanced for acquisitions of assets from November 21, 2018 to December 31, 2027.  For example, a $1,000 laptop under the regular rules would yield a deduction of $275, under the enhanced rules, the deduction is $825.

18. Zero-emission vehicles
The government introduced a new 100% write off available for qualifying zero-emission vehicles for vehicles acquired after March 18, 2019 and that become available for use before 2028.
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-229-other-employment-expenses/capital-cost-allowance/classes-depreciable-properties/zero-emission-vehicles.html (key words: cra zero-emission vehicles)

19. Director Liability – what you need to know if you own a company or sit on a board
If you are the director of a corporation or non-profit organization, it’s important to know that directors can be held personally liable for unpaid HST and payroll deductions. CRA is a preferred creditor over other creditors, so in times of financial difficulty, it is important to ensure that the appropriate CRA payments are being made.

20. Passwords and Identity Theft
To protect yourself against cyber attacks, it’s a good idea to have different passwords for different websites. At a minimum, make sure that for sensitive logins like your bank and CRA account that you use a unique password.

Please contact me if you would like to discuss any of this information.

Although our in-person gatherings might be smaller this holiday season, I hope that you are able to connect with friends and family in other ways.

Wishing you all the best,

Viviane