2020 COVID Edition
*Plan ahead for tax-filing season. To avoid delays and reduce your exposure to COVID-19, the Canada Revenue Agency (CRA) encourages you to sign up for their direct deposit and file online as early as late February.
GENERAL
Do I need to file a tax return?
If you are a resident of Canada, you have to file an income tax return for tax purposes and if you owe tax. You should file if you want a refund, claim benefits or income tax credits. If you do not file, some key benefits may be withheld.
When should I file taxes?
For Individuals
The due date for filing an income tax and benefit return and paying any related tax balance due is April 30, 2021.
For self-employed individuals
If you are self-employed or have a spouse or common-law partner who is self-employed, you both have to file a return by June 15, 2021.
To avoid late-filing penalties, pay any amount you owe by April 30, 2021. After this date, the CRA charges interest on what you owe until your balance is paid.
For a deceased person
If you are filing a return for a deceased person, the due date depends on the date of death and if the person owned a business in 2020.
If the individual passed away in between January and October, the due date is April 30, 2021. If the individual passed away in November or December, the due date is 6 months after the date of passing.
If you are the surviving spouse of a deceased person or common-law partner and you were living with the deceased, the due date for filing your return is the same as the due date for the deceased person’s return. However, if you have a balance owing, you must pay it on or before April 30, 2021.
TAX SLIPS
What tax slips do I need to submit to file my return, and when do I get them?
*If you received Canada Emergency Response Benefit (CERB), Canada Emergency Student Benefit (CESB), Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), or Canada Recovery Caregiving Benefit (CRCB) payments, these are considered taxable income. You should receive a T-Slip for these programs.*
You should have received most of your slips and receipts by the end of February when they’re due. If you can’t get a slip to do your tax return or if you don’t receive your slips, you may be able to get them from your CRA My Account as of February 28, 2021. Most slips should be received by mail by mid-March at the latest.
When you file your tax return, you must submit your tax information slips. Employers, organizations and/or financial institutions start sending out tax slips in the month of February, they have until the end of February to issue tax slips in most cases. These are some of the main tax slips, but you may receive others as well:
- T3 – Statement of Trust Income Allocations and Designations
- T4 – Statement of Remuneration Period
- T4A – Statement of Pension, Retirement, Annuity and Other Income (such as benefits issued by the CRA due to COVID)
- T4A(OAS) – Statement of Old Age Security
- T4E – Statement of Employment Insurance and Other Benefits (for benefits issued by Service Canada)
- T4RIF – Statement of Income From a Registered Retirement Income Fund
- T4RSP – Statement of RRSP Income
- T5 – Statement of Investment Income
How long do I need to keep my tax return records after filing?
Yes. The CRA recommends keeping your records for at least 6 years should they need to review your returns or may request documents from your tax returns.
We recommend putting them in the cloud, and it is accessible anytime.
What is the tax year in Canada?
The tax year starts on January 1 and ends on December 31.
What are the federal tax rates in Canada?
The federal tax rates are the basis for CRA to determine the income tax you have to pay on your taxable income. In addition, each province and territory also has its respective tax rates. The Federal tax rates and brackets for 2020 are as follows:
- 15% on the first $48,535 of taxable income
- 20.5% for over $48,536 up to $97,069
- 26% for over $97,070 up to $150,473
- 29% for over $150,574 up to $214,368
- 33% for over $214,369
How much should I earn before paying income tax?
The basic personal amount for the federal tax rate in 2020 is $13,229. So you can earn at least this before paying the federal income tax.
How do I pay if I have a balance due on my tax return?
Depending on which method works for you, there are different ways of settling your tax due. For Individual Income Tax (T1), you may make your payment by Debit Card, Pre-authorized debit, Online banking, Credit Card or PayPal, Wire transfers for non-residents, A service provider or any Canadian financial institution, Payment in person and Payment by Cheque or go to Payment to the Canadian Revenue Agency
Can I still change/correct my tax return after filing it?
Yes, you can change your return once you receive your notice of assessment from the CRA. You may correct your return on My Account from the CRA portal. If you are not using My Account, you may fill out a T1-ADJ Form. We suggest everyone sign up for CRA’s My Account – it will make your life easier.
What if I miss the deadline for filing taxes?
If you file after the deadline and don’t owe tax for the year, you will not pay any penalties. But if you owe tax for 2020, the CRA will charge you a late filing penalty and compound daily interest on unpaid amounts. Late filing may delay getting your benefits paid if you are eligible for the GST/HST credits and Child Tax benefits.
Can I split my income with my spouse?
It depends on the type of income. Splitting income with your spouse may reduce your total net and taxable income.
Do I have to pay tax on lottery winnings?
No. Lottery winning is not taxable in Canada.
At what age should my children file a tax return?
All individuals who get income in Canada should file a personal tax return regardless of age.
Do I have to file a tax return for my deceased spouse?
Yes, for more information, don’t hesitate to get in touch with KATA Accounting Solutions Professional Corporation.
What if I cannot afford to pay my tax bill?
Contact CRA immediately if you cannot afford to pay your tax bill. You may qualify for a payment plan that CRA will arrange for you.
Should I file my tax return in conjunction with my spouse?
Yes. When you file your personal income tax, you must provide details of your marital status and information about your spouse. This will also help lower your tax payment or tax refund. At KATA Accounting, we take the philosophy of maximizing the refund for the total family.
MEDICAL EXPENSES
Can I claim my medical expenses?
You can claim only eligible medical expenses you, your spouse or your partner have paid for within any 12-month period ending in the current tax year. These expenses should not have been claimed in the previous tax year.
TRANSPORT TAX CREDIT
How do I claim the public transport tax credit?
You can no longer claim a public transport tax credit
Can I claim the Ontario Seniors’ Public Transit Tax Credit?
If you are 65 years old or older and reside in Ontario, you can claim a refundable tax credit of up to $3,000 for your eligible public transit expense.
You must provide your receipt and proof of payment to claim your Ontario Senior’s Public Transit Tax Credit.
RENTAL PROPERTIES
Do I need to pay taxes for a rental property?
Yes, income from a property being rented is taxable. It is considered rental income when you rent out your property and provide basic services like laundry, parking, and utilities. If you provide more than the basic services, it will be considered business income and subject to Canada Pensions Plan (CPP) premiums.
Shall I include my income from renting my property when filing my personal tax?
You must report all rental income you received in 2020 in filing your 2020 personal tax return. These will include deposits for the first and last month’s rent and advance payments for 2020. You may not report as income if a certain rental deposit has to be returned to the tenant at the end of the lease.
I own the rental property with my spouse; how do I file my tax?
If you own the rental property with your spouse or someone else, you are considered a co-owner. You will report your rental income on your tax return based on your share or ratio, which you agreed on with your spouse or the other co-owner.
Can I deduct my expenses related to the rental property from my rental income?
Yes, you can deduct reasonable expenses incurred from your rental property. You can claim these expenses even if the property has no tenant and is available to rent. The following are some of the expenses you can claim: Mortgage interests, Property taxes, Insurance premiums, Utilities and condo fees, Repairs and maintenance, Vehicle expenses, Management fees, office expenses, Garbage removal fees, Advertising costs, Commissions and Depreciation. Contact KATA Accounting for a free template!
How do I claim expenses for renting out one of the rooms in our house?
You can only deduct the percentage of reasonable expenses from the rented portion of your house.
There was unpaid rent from the tenant, which resulted in a rental loss. What should I do?
If you have rental losses due to uncollectible rent at the end of the tax year, you can deduct your rental loss against your rental income. To claim this deduction, you must be able to provide proof of uncollectible rent, like letters to the tenant for rental payment or notice to creditors.
I am renting a room in my house to a relative at less than the rental price in the market. Shall I claim a rental loss?
If you rent a room for a family or friend at less than the Fair Market Value and do not expect to make a profit, you cannot claim a rental loss. It is considered a cost-sharing arrangement and not an income. You cannot claim rental expenses, and you do not need to include them on your tax return.
Buy and Sell Properties
Do I have to pay tax if I buy a house?
When you buy a property, there are certain applicable taxes that you have to pay, such as Land transfer tax, GST or HST (for newly constructed and renovated homes) and Property tax. A tax form must be completed when real estate is bought or sold.
Do I need to report the sale of my house when I file my tax?
Yes, you need to report the sale of your house on your personal income tax return, regardless of whether you use your home to receive income.
Do I have to pay tax if I sell my house?
If the house you are selling is your principal residence, you do not pay the capital gains tax for selling your property. However, you need to report in your income tax return the basic information such as the Date of acquisition, Proceeds of disposition and Description of the property.