What you need before filing your 2020 tax return to save the most money
TORONTO -- The COVID-19 pandemic changed our lives in 2020 and it means there are many tax changes, including some that could help you and some that could cost you money.
If you applied for government assistance for programs such as the Canadian Emergency Response Benefit (CERB) you may have to pay taxes on the money you received.
Evelyn Jacks is the president of the "Knowledge Bureau" and author of more than 50 tax books, including her latest "Make Sure It’s Deductible."
Jacks said this tax season "a really good year where people should get sound advice."
She added that the deadline to contribute to your Registered Retirement Savings Plan (RRSP) to try and reduce the amount of tax you pay is March 1 and if you can do some tax planning you could save money.
"If you received CERB that was good news, but the bad news is they didn't withhold any tax from it. So you're going to have to report that in your income this year," Jacks said.
Jacks said if you can try to contribute to your RRSP.
"If you can put the money into your RRSP it can reduce your income and reduce your taxable income - two important things to do," Jacks said.
Another change during the pandemic is that many people worked from home.
As many parents were home with their children, they may have fewer childcare expenses to deduct but they can claim work at home expenses.
If you have a lot of home office expenses because you put in a home office and bought computer equipment and furniture you’ll need receipts, however there is also a simplified version where you can claim up to $400.
"Under the simplified message you can claim $2 per day for your home office expenditures, but you had to be working from home for four consecutive weeks," Jacks said.
It's always a good idea to get tax advice whenever there is a big change in your life such as a divorce, a job loss or if you buy a rental property.
Jacks said it's wise to speak with a tax professional if you can, but she says if you use Canada Revenue Agency approved tax software all the changes due to COVID-19 should be there.
"Your tax return is only going to be as good as the information that goes into it. But you can expect that these new provisions resulting from the pandemic will be in there (in the tax software)," Jacks said.
About 90 per cent of Canadians filed their tax returns electronically last year. If you do, you could get your refund in as little as two weeks.
For the three million Canadians still filing on paper it can take as long as two months to get a reply from the Canada Revenue Agency.