As the COVID pandemic gripped the globe the CRA announced that for the first time they would be provide sweeping (temporary) forgiveness on tax balances owing from the 2020 tax year. For large numbers of tax payers who had a balance owing for their 2020 tax return, they were advised that the balance would be interest free until April 2022, for a lot of tax payers this meant over 12 months of interest free debt with the CRA. Those days have now passed, and so have the days of low interest rates which is expected to lead to some unexpectedly high fees and penalties for those who fail to comply with CRA’s filing deadlines, and those who have outstanding debts owed to CRA.

What are CRA’s penalties?

There are a range of ways that CRA can penalize tax payers for failing to adhere to their filing requirements. For most individuals the tax filing deadline is April 30, failure to submit your tax return by this date can result in a late filing penalty, as well as additional interest charged on the outstanding balance owing to CRA. Interest is compounded daily!

Please note, if you do not have a balance owing to CRA resulting from your T1 tax filing, there is no late filing fee or interest charged as there is no balance owed to CRA resulting from your T1.

Late filing penalty

If you have a balance owing to CRA you will be required to file your tax return to CRA before a deadline to avoid a late filing penalty. For individuals who are self-employed (or have a spouse/common-law partner who is self-employed), the filing deadline for your T1 tax return is June 15. For all other individuals the filing deadline for their T1 is April 30. 

If your tax return is submitted late to CRA, there is an automatic late filing penalty of 5% of the balance owing. For every month that the balance remains unpaid there is an additional 1% penalty of the outstanding balance which can be charged up to a maximum of 12 months. Partial payments can be made to lower the outstanding balance and to reduce the impact of the additional 1% charges on the outstanding balance.

Interest fees

If you have a balance owing to CRA there is compounding daily interest charged on the balance owing, starting on the date after the tax return was required to be filed. So, if you owe CRA $1,000 as a result of your 2021 tax return, there would be interest charged on that $1,000 as of May 1, 2022 (the day after April 30 filing deadline).

Interest is also charged on the late filing penalty balance owing. Interest is charged on any amount owing to CRA, including the tax owed to CRA and any late filing penalties owed to CRA.

Interest is charged based on a prescribed interest rate + 4%. 

How do increases to interest rates impact CRA’s penalties / fees?

During the COVID pandemic interest rates were reduced to record lows by the bank of Canada in an attempt to keep the economy functioning, this was good news for individuals who owed money, either to lenders or to CRA. CRA’s prescribed rate was reduced to 1%, which meant that interest was being charged at the prescribed rate (1%) + 4% = 5%. Which is the lowest possible rate that could be charge on outstanding balances. As inflation started affecting the economy in 2022, the bank of Canada was required to increase interests rates to curb the increasing inflation. This increase in interest rates directly impacts the prescribed rate which is used by CRA, and accordingly CRA’s prescribed rate has increased since 2021. For individual’s who have balances owing to CRA the interest being charged is now increasing which will make it more difficult for individuals to settle their debts with CRA moving forward.

Seeking forgiveness from CRA?

For some individuals who have been met with extenuating circumstances in their lives there is an avenue to a form of debt forgiveness from CRA. In some circumstances CRA would agree to stop charging additional interest and penalties if an individual is able to meet a repayment plan, allowing the individual to settle their balance owing over a period of time without additional interest charges holding them back.

Unsure of your tax filing obligations?

If you are unsure of your tax filing obligations and are seeking assistance with your tax filing and meeting your tax obligations, please feel free to get in contact with the JTB team via email at team@jackstaxback.com . At the time of posting we are not accepting walk in consultations at our Vancouver office, we are still handling tax filings as usual over email correspondence.

One of the most common questions we are asked by clients is whether they should be contributing surplus funds to a TFSA or an RRSP. This is a broad question, as the right decision varies greatly from person to person, and requires an understanding of the individual’s needs and goals.

Firstly – Avoid over contributing!

When delving into the world of RRSP and TFSA contributions it is easy for some tax payers to get carried away with attempting to save on tax, those who overcontribute above their allowable limit are hit with over contribution penalties by CRA, resulting in zero tax savings as a result. Before making contributions to either a TFSA or RRSP account please ensure you review your online CRA account or most recent Notice of Assessment to identify your contribution limit for that tax year. Only contribute amounts within your limit to avoid penalties!

How does your RRSP limit increase?

If you do not contribute to an RRSP account you will notice an increase in your contribution limit over time. Failure to contribute in a tax year does not result in ‘missed out’ contribution, as the unused limit is carried forward to future years. For the vast majority of tax payers, the RRSP contribution room is increased by 18% of their earned income from the prior tax year. 

For example. John from Vancouver earned $100,000 in 2020, he has never made a contribution to an RRSP. The increase to his RRSP contribution limit will increase by $100,000 x 18% = $18,000 for the 2021 period. This $18,000 will be added to his carried forward limit from 2020.

How does your TFSA limit increase?

Similarly to the RRSP limit mentioned above, failure to contribute to a TFSA account during a tax year does not result in that contribution room being ‘missed out’, unused balances are carried forward to future periods. The annual increase to TFSA contributions is advised by CRA each year, and is the same for every tax payer. It is not based on an individual’s income levels. 

For example. Sharon from Victoria had unused TFA contribution room of $50,000 at the start of 2020, CRA advised that the additional TFSA limit being added for 2021 was $5,000, this means Sharon is able to contribute $55,000 to a TFSA account in 2021 without being penalized.

RRSP deduction – Receive a tax refund

When contributing to an RRSP account tax payers are eligible to claim a deduction on their tax return for the amount of the contribution (as long as it is all within their limit). This allows for an individual to be refunded for tax paid on the amount of the contribution at their highest marginal rate of tax being paid.

The main theory behind contributing to an RRSP is that you are refunded for tax being paid at a higher rate while you are earning higher levels of income during employment, then when you receive the funds out of your RRSP account during retirement and recognize those funds as income you are then hit with tax at a lower rate, as you will be in a lower tax bracket during retirement. With an RRSP you are essentially deferring tax until retirement at which point you will be in a lower tax bracket. 

There are no deductions allowable for TFSA contributions, however you can withdraw funds from a TFSA on a tax free basis.

RRSP contribution timing

Tax payers are eligible to claim deductions for RRSP contributions made during the tax year, including up to February 28 of the following tax year. For example, Arash from Kelowna contributed $10,000 to his RRSP during the 2022 tax year, he also contributed an additional $2,000 before February 28, 2023, Arash is eligible to claim the full $12,000 deduction on his 2021 tax return, even though $2,000 was contributed in 2022. (He can only claim the $2,000 deduction in one tax year, he can choose whether to claim the deduction in the  2021 or 2022 tax period)

Unsure of the implications of your RRSP and/or TFSA on your tax return?

There are a lot of pros and cons with regard to choosing a TFSA or RRSP, and there are a lot of additional discussion points including the home buyers plan associated with the RRSP, or the option to choose a self-directed TFSA to avoid potentially unlimited levels of capital gains taxes. If the topic is too overwhelming, or you do not know how to account for your TFSA or RRSP on your tax filing, please do not hesitate to contact the JTB team at team@jackstaxback.com . At the time of posting our Vancouver office is not open for walk in consultations. We are continuing to handle all tax filings over email correspondence as usual.

Many individuals working in the construction industry seek the red seal qualification as a means to prove their high level of skill and experience, ultimately allowing them to be paid a higher wage. The BC province actively encourages individuals to seek this higher level of skill by providing a range of tax credits and other financial incentives. If you have recently completed a certain level of competency as part of the red seal program you could be entitled to receive a tax credit on your next tax return.

How to claim the credit – Levels of completion – Impact on tax return

Depending on the course you are completing, there are differing levels of completion. A typical red seal course will see a tax payer complete 4 levels of the red seal program. Depending on the course being completed you can claim BC provincial tax credits upon the completion of levels 3 and 4. 

It is very important to understand your course, and the eligible tax credits that can be claimed for each level of completion, as the tax credits available are very generous. For example, a plumber is eligible to claim level 3 tax credits upon completion of level 3 of the program, and they are also eligible to claim level 4 tax credits once they have graduated from the red seal program. The level 3 tax credit is $2,000 and the level 4 tax credit is $2,500. This means a tax payer who passes level 3 and also graduates in the same year is entitled to a total tax credit of $4,500, which will directly increase their tax refund amount by $4,500. It certainly pays to be aware of the potential tax credits available. 

What programs are eligible for the credit

It is important to note that not all programs that qualify for the red seal certification are eligible for the BC provincial tax credit. For example, a tower crane operator completing the program after 2016 is able to receive the red seal certification, however there are zero available tax credits that can be claimed from completing the program. 

When commencing a program, it is important to understand the tax credits you may be eligible to claim. Detailed information regarding the programs and their respective eligible tax credits can be found using the following link to the BC government website:

https://www2.gov.bc.ca/assets/gov/taxes/income-taxes/publications/training-tax-credits-table-eligible-programs-completion-requirements-apprentices.pdf

Apprentice incentive grant

Most red seal programs will require you to pass levels one and two, upon completion of these levels there are no tax credits that can be claimed as part of your provincial tax credits; however you may be eligible to apply for the apprentice incentive grant. The apprentice incentive grant is a federally issued grant to individuals who are completing levels one and/or two for eligible red seal programs. It pays to be informed of the available grants that can be received. Grant payments that are received are considered to be taxable income, and as such you will be issued with a tax slip at year end highlighting the grant income received. It is important to ensure that all income information is declared on your tax return when filing after year end.

Audits by CRA

Red seal tax credit claims are an ever-increasing area for audits by CRA. Due to the complex nature of the tax credit claims and a lot of confusion over which programs qualify, and the various levels that can be completed for each program it results in a lot of errors when tax returns are submitted to CRA. The CRA will request a certificate of completion to identify the course which has been completed, and they will remove tax credits which have been incorrectly claimed. 

Questions/Assistance with tax filing

 If you have questions about the tax credits that can be claimed from completing various levels of the red seal program, please do not hesitate to contact the jackstaxback team via email team@jackstaxback.com . We will be more than happy to field any questions or concerns you may have, as well as providing tax filing services which include the red seal tax credit claim. As of today (January 2023) our Vancouver office is not open for walk in appointments. If you wish to contact us, please forward your queries to our email address. Our tax filing services are operating as usual over email. 

For the majority of individuals who successfully apply for a job, it is evident that you are taking on a role as an employee. As an employee you receive a pay cheque at the end of each pay period which identifies the amount of income tax, Canadian Pension Plan and EI withheld and ultimately your net pay (net of tax pay). 

However, it is not always that simple. Over the past few years we have seen an increasing trend of tax payers who have been paid on a contractor basis (no tax withheld by employer) without being informed by the employer. The majority of these tax payers have been newcomers to Vancouver, Canada who are not familiar with the Canadian tax system and the vast majority believed they were being paid as an employee with tax being withheld by the employer. 

Tax implications to tax payer?

So, what does this mean for the tax payer when they find out they have been paid as a contractor? In short, they will owe tax to CRA. Where the tax payer believed they were paying tax with each pay cheque, this was not the case, which presents the unfortunate reality that tax will likely be owed to CRA by the tax payer.

Why would an employer prefer to have contractors?

From some examples we have seen, it appears the employer ‘tricked’ the tax payer into believing they were an employee, but why would an employer prefer to pay tax payers on a contractor basis. In short, they will save money. When hiring employees and employer is required to pay employer contributions for EI and Canadian Pension Plan, they will also be required to incur additional payroll related costs for running payroll each pay period, and producing T4s to employees at year end. When paying an individual as a contractor, the employer avoids all these additional costs. 

Cons to tax payer of being a contractor

When a tax payer is surprised to find out they are a contractor, there is the initial shock that tax is ultimately required to be paid on their net income. There are also additional cons to the tax payer:

• More technical tax filing when compared to filing a T4 tax return. A contractor is required to fill out a T2125 declaring their income and expenses on their tax return. If filing themselves, this would require the tax payer to carry out research on the allowable deductions and other tax compliancy issues. 
• When recording deductions on a T2125 this increases the record keeping requirements of the individual who will be required to retain copies of receipts for several years.
• A contractor is required to pay a higher rate of CPP on their income, usually resulting in a higher amount of CPP being paid when compared to being an employee
• Access to EI is more difficult when operating as a contractor

Pros of being a contractor

It is not all doom and gloom, and naturally some tax payers prefer operating as a contractor to an employee. There are many pros to being a contractor when operating in a correct manner:

• There are far more allowable deductions against contractor income when compared to employment income. This can result in a lower tax payable when operating as a contractor (this depends on the nature of the business and level of eligible deductions). The most common allowable deductions are home office expenses as well as vehicle usage expenses. 
• There is no required EI contribution on contractor income. 
• Usually a contractor will have more freedom to decide the time and place of their work activities and will usually be able to carry out work for more than one company, whereas some employees are required to sign contracts which reduce the flexibility of their work and ability to work for more than one company.

Questions/Tax advice

If you are unsure of your employment status, or require a consultation related to any of the information provided above, or a tax question in general, please do not hesitate to contact the Jackstaxback team at team@jackstaxback.com . At this time (January 2023) our physical office in Vancouver is not open as we have switched to satellite office operations since the start of COVID. We are currently carrying out tax consultations over the phone, and are fully operational as usual over email. 

If you are an employee who earns commission income, you need to ensure that you are maximizing the deductions claimed on your tax return to ensure that you are receiving the largest tax refund possible when filing your tax return. 

Typically, tax payers are allowed to claim deductions up to the amount of commissioned based income you earned in the tax year. To identify your commission income for the tax year you can simply look at your T4 for the Box number 42 amount. 

What are the allowable deductions?

The most common allowable deductions that can be claimed on your tax return are:

• Accounting and legal fees
• Advertising and promotion costs
• Entertainment costs
• Travel costs
• Training costs
• Home office costs
• Vehicle costs

Please note, tax payers cannot claim deductions for items or which they received a reimbursement from their employer.

Additional requirements for home office deduction claim

To make use of the home office deduction claim on your tax return you must meet one the following criteria:

• Tax payer works from their home office more than 50% of the time
• Tax payer uses the office space solely for work activities and uses the space regularly for work meetings

The home office deductions are claimed on the tax return in proportion to the total home space which is used for work activities, this can be calculated based on a square foot percentage or per number of rooms percentage. Ie the tax payer uses one room out of five total rooms in the home for their work office, this means that they can claim 1/5 = 20% of their allowable home office deductions on their tax return.

Commissioned based employees are eligible to claim home insurance and property taxes as part of the eligible home office deductions, these are not allowable for non commissioned based employees.

Additional requirements for vehicle deduction claim

When claiming vehicle deductions on your tax return as a commissioned based employee you are fortunate to be able to claim a portion of your vehicle’s depreciation as a deduction on your tax return, in addition to the usual gas, insurance, repair and maintenance that is available to non commissioned based employees. 

When claiming vehicle expense deductions on your tax return it is important to maintain a vehicle log in which you track the vehicle usage over the tax year, tracking the percentage of kilometers which are specifically work relate. When claiming the vehicle expense deductions on your tax return the claim is limited to the percentage of the vehicle usage which was work related. For example – A tax payer drives the vehicle 10,000km in the tax year, of which 5,000km were work related, this means that only 50% of the vehicle related costs (gas, insurance) are eligible to be deducted in the tax return.

It is important to retain the vehicle log in case audited by Canada Revenue Agency in the future for vehicle deductions.

Ask your employer for a signed T2200

When claiming expenses related to your employment on your tax return it is important to secure a signed T2200 from your employer. This is essentially a confirmation from your employer stating that you are eligible to claim certain expenses related to costs incurred from your employment on your tax return. Having a T2200 to hand will provide an easy answer to the Canada Revenue Agency if they ask for proof of your eligibility to claim the deductions on your tax return.

Questions / Assistance with tax filingIf you are a commissioned based employee, and are unsure of how to maximize your deductions and increase your tax refund, then please get in touch with the Jackstaxback team at team@jackstaxback.com . We will be more than happy to assist you with a tax consultation as well as assistance with your tax filing to ensure you receive the maximum allowable tax refund possible. At this time (January 2023) or Vancouver located office is not open for walk ins. We are operating a satellite office and can handle your queries over the phone or email. We will continue to offer Canadian tax filing services over email as usual.

During the 2020 tax filing season we handled an increasing number of tax returns where individuals had multiple employers. Closures of businesses were an issue Canada wide. Reduced operating hours became common place, and forced many to take up multiple employments in order to maintain the income levels to which they were accustomed.  We imagine the case will be the same for the upcoming 2021 tax filing season, but how exactly can multiple employments during the tax year affect your tax return?

Have your employers been taxing you correctly?

Some employers, especially smaller or new businesses are not always the most organized when it comes to managing their payroll and tax deductions from their employees pay. This can cause problems when it comes to tax filing at year end, as we often see T4s where the employer has made quite substantial errors over many pay periods where the individual had been taxed incorrectly. We have seen cases where individuals have earned over $15,000 without having a cent of income tax deducted from their pay.  These types of payroll deduction errors can result in large tax balances owing to CRA (Canada Revenue Agency) at year end, which often comes as a surprise to the individual filing their tax return.

When an individual has more than one employer, the additional employers should be deducting tax at a higher rate than the first employer, to take into consideration the pay that has already been earned for the year to date from that first employer. If multiple additional employers are all taxing pay at a lower rate than required this will most likely result in a tax balance owing to CRA at year end.

What happens if you have a tax balance owing? 

It is not great news to find out that you owe money to CRA at year end (especially with the increasing accommodation rental rates in Vancouver and other Canadian cities), however it is not the end of the world! It is actually quite common for an individual to have a tax balance owing, and as long as your tax return is filed before the deadline and the tax balance paid to CRA on time, you will not be penalized. This is why it is important to submit your taxes to CRA on time, to avoid penalties on tax balances owed to CRA. 

How can you ensure that you do not have a tax balance owing at year end?

When you start working for an additional employer during the tax year you should inform them of your current employment status. By informing your employer of your year to date income from another employer, they will be able to tax your pay at the correct rate, this means you will not be undertaxed on your pay and therefore owing tax to CRA at year end. 

You cannot locate your T4 from your previous employer and they are not responding to your requests for a new T4

If you cannot find T4s from all of your employers for the tax year you can either log into your CRA account online to download your T4 slips, or call CRA and request that they mail a copy to you. If you are close to the tax filing deadline and do not have time to receive a copy from CRA or set up your online CRA account, we offer a $30 tax slip download service whereby we can access your tax slips online and download them for you.

Do you have any questions or need assistance with your tax return filing?

If you have any questions regarding your deductions from your pay cheques, issues with your employer correctly deducting your pay or any other tax related queries, please get in touch with the team at team@jackstaxback.com or visit our Vancouver office* and we will be more than happy to assist you. Tax doesn’t have to be taxing!

*At the time of publishing our Vancouver office is not open for visits due to COVID-19. Please reach our team via email – team@jackstaxback.com 

We often receive the same tax related questions from clients and often advise on the same common tax misconceptions. Here are a few of the most reoccurring examples

I did not earn money in Canada during the tax year so do not need to file a return?

Technically speaking if you are a Canadian tax resident and did not have any income during the tax year from any source around the world, then you are not required to file a tax return. However, it is very probable if you fail to file a return for a tax year that CRA will be in contact in the future requesting you to file that return. If CRA request that you file a tax return, you will be required to file the tax return. 

Even if you did not have any income within Canada during the tax year you may be entitled to a small tax refund when filing. British Columbia Residents are issued with a $75 tax credit even if they have zero income to declare, to it does pay to file your return.

What are the dates of the tax year in Canada?

We file tax returns for quite a lot of temporary foreign workers, many of whom come from countries which have varying tax year dates. In Canada the tax year run from January 1 – December 31 which is quite easy to remember!

I missed the tax deadline, is it too late to file my taxes?

It appears there must be some ‘fake news’ online among Vancouver facebook groups which has led a lot of individuals to believe that if they miss the April 30 deadline to file taxes they must wait until the next tax year to file their taxes. Fortunately, this is not true! If you are late to filing your tax return and miss the April 30 deadline you can still file your tax return. It is also advised that you do file your tax return as soon as possible, if for some reason you owe money to CRA the sooner you settle the tax balance owing with CRA the less interest that will be added to that tax balance owing.

I have multiple tax years that need filing, can I file it all on one tax return?

Unfortunately, this is not possible Canada, we cannot speak for other countries. Although if enough people suggest this option to CRA maybe it could become a reality. For those who have multiple years which need filing it can often be a pain tracking down all the income and expense information from many years ago. As painful as tax filing can be, it is advised to file your taxes as soon as possible.

I arrived in Canada towards the end of the year so need to file a tax return as a non-resident?

We receive a lot of questions from first time tax filers who are new to Canada and are unsure of their tax residency. One misconception is that if you have arrived in Canada towards the end of the tax year, and resided in Canada for less than 6 months by the end of the tax year that you must be filed as a ‘non-resident’. For the most part, this is untrue. If you arrived in December, and are planning on residing in Canada for longer than 6 months you would file your tax return as a newcomer tax resident even though you would have only been residing in Canada for a month by the end of the tax year.

Do you have any tax related questions or concerns?

If you have any questions, queries or have been provided with some tax advice that does not seem correct, please do not hesitate to get in contact with the team at team@jackstaxback.com or visit our Vancouver office* and we can help you navigate the complicated world of tax. Tax doesn’t have to be taxing!

*At the time of publishing our Vancouver office is not open for visits due to COVID-19. Please reach our team via email – team@jackstaxback.com 

If you have worked from home during 2021 and been issued a T2200 from your employer, you may be in luck, it could increase your 2021 tax refund quite substantially!

What is a T2200? 

A T2200 is a form that Canadian employers fill out which allows you to claim employment related expenses on your tax return. The most common reason an employer would fill out a T2200 is because an employee has been required to carry out their employment duties from a home office. Employers are not obliged to fill out a T2200, so if you have worked from home and have not received a T2200 it may be worth asking your employer’s payroll department to fill one out for you. 

What does a T2200 mean for your 2021 tax return?

If you have received a T2200 on which your employer has stated that you were required to work from a home office you will be able to claim the following expenses on your tax return:

• Electricity
• Heat
• Water
• Home internet access fees
• Minor home repair and maintenance costs
• Rent paid for your home
• Home insurance (Commission employees only)
• Property taxes (Commission employees only)
• Office supplies (Pens, paper, ink cartridges, general stationary)

How does this improve your 2021 tax refund amount?

When you claim expenses on your tax return, they reduce your taxable income, thereby reducing the amount of tax owed on your income, which will either improve your entitled refund amount or reduce a balance owing to CRA (Canada Revenue Agency).

How do you claim the expenses on your tax return?

You will be required to declare all eligible expenses incurred during the 2021 tax year. You will also need to declare the percentage of your home which makes up your home office. If you incurred $10,000 in home office expenses, and used 10% of your home as your office, this will provide you with a $10,000 x 10% = $1,000 home office deduction on your tax return. 

What will be better for my tax refund? The simplified flat rate method or the detailed method?

You can see from the above example how it is possible to be entitled to a $1,000 deduction on your tax return, this is higher than the maximum $500 deduction claim when using the simplified deduction method. For those who worked from home for the full 12 months of 2021 it is quite easy to incur over $10,000 in apartment rental costs alone (especially in Vancouver and other large Canadian cities), so those who are renting are usually entitled to a larger deduction when using the T2200 detailed claim method, than the simplified method. 

Do you have any questions about your 2021 tax return?

If you have any tax related questions at all, please do not hesitate to contact the team at team@jackstaxback.com or visit our Vancouver office*. We will be happy to assist you become more knowledgeable about your deduction eligibility and to claim the detailed home office deduction through a T2200 on your 2021 tax return if you wish to use our services. We will also be able to advise on any other deductions or tax credits that may be applicable to your tax situation. Tax doesn’t have to be taxing!

*At the time of this posting our Vancouver office is not open for visits due to COVID-19. Please reach our team via email – team@jackstaxback.com 

As many of you are aware, in 2020 CRA (Canada Revenue Agency) introduced a new simple way for individuals to claim working from home expenses due to the large numbers of tax payers who were required to work from home due to COVID-19. It is important to note that there have been positive changes made to this simplified working from home expense claim that are being implemented on your 2021 Canadian tax return.

What has changed on your 2021 tax return?

Last year (2020 tax returns) the simplified flat rate deduction was calculated as $2 per day worked from home, up to a maximum deduction claim of $400. This year CRA have announced that this is increasing to a $500 maximum deduction claim! Woohoo.

Who is eligible?

To be eligible to take advantage of the home office expense claim on your 2021 tax return you must meet all of the following criteria:

• You must have worked from home (in Canada) in 2021 due to the COVID-19 pandemic
• You must have worked from home for more than 50% of the time from home for a period of at least 4 consecutive weeks during 2021
• You must only be claiming home office expenses, and are not claiming any other employment expenses on line 22900 of your 2021 tax return
• Your employer must not have reimbursed you for all of your home office expenses incurred during 2021

How do you claim the home office deduction on your tax return?

To make this claim on your 2021 tax return you will need to declare the number of days that you worked from home in your home office

What does this deduction do for your tax return calculations?

We had a lot of clients who were caught out on the definition of a ‘deduction’ on their 2020 tax return. Unfortunately, the $500 deduction will not improve your 2021 tax refund by $500, this deduction simply means that you will no longer be required to pay tax on $500 of your 2021 income. For individuals in a higher tax bracket the deduction will offer higher tax savings than those in a lower tax bracket. 

Do you have any questions about your 2021 tax return?

If you have any tax related questions at all, please feel free to reach out to the team at team@jackstaxback.com or stop by our Vancouver office*. We will be more than happy to assist you become more knowledgeable about your deduction eligibility and to claim the home office deduction on your 2021 tax return if you wish to use our services. We will also be able to advise on any other deductions or tax credits that may be applicable to your tax situation. Tax doesn’t have to be taxing!

*At the time of publishing our Vancouver office is not accepting in person meetings due to COVID-19. Please reach our team via email – team@jackstaxback.com 

We file tax returns regularly for temporary foreign workers and international students who are new to Canada within the tax year. There is often confusion surrounding newcomers’ obligations to file a tax return if they arrived at the end of the tax year, but did not actually take up employment or have any income before the end of the tax year. 

What are your tax obligations?

If you arrived in Canada and did not take up employment or generate any income while residing in Canada, then you technically are not required to file a tax return unless you receive a letter from CRA (Canada Revenue Agency) demanding that you file a tax return. 

What are the financial benefits to filing a Canadian tax return even if you had zero Canadian income?

There are certainly financial benefits to filing a Canadian tax return if you were residing in Canada but did not earn any income. If you are a newcomer tax resident you will often receive a tax refund when filing a tax return even if you did not have any income. In British Columbia tax residents can receive a $75 tax credit (refund) if they file a tax return without even reporting any income. 

What are the logistical benefits to filing a Canadian tax return even if you had zero Canadian income?

When becoming a tax resident in Canada you are required to report your date of arrival on your first tax return that is filed with CRA. If you arrive in Canada at the end of the tax year, but do not file a tax return because you did not have any income, this can create processing errors by CRA when a tax return is subsequently filed the following year without the recording of a date of entry. This type of error results in CRA changing individuals’ status to ‘non-resident’ as they have no record of a date of entry. It can be quite problematic correcting ‘non-resident’ tax status with CRA, who are notoriously slow at implementing changes.

Benefits of filing for students

International students who are new to Canada that did not have earnings can benefit from filing a tax return. In order to record tuition credits with CRA a tax return must be filed for the period in which the tuition credits are earned, even if there was no income during that period. To benefit from your tuition credit which can be carried over into subsequent tax years it is certainly beneficial to file a tax return. 

Application for GST/HST credit

Individuals who have earnings under a certain threshold are entitled to receive a quarterly (4 times a year) cheque from the Government. In order for the government to assess individual’s entitlement to receive this benefit, a tax return must be filed with CRA. If you are a newcomer to Canada and wish to apply to receive this benefit in the next tax year you must file a tax return in order to apply. Waiting 12 months to file a tax return can result in individuals missing out on over $500 in benefit payments.

Questions and assistance with tax filing

If you have any questions about the benefits of filing a tax return even if you did not have any Canadian income, please do not hesitate to contact us at team@jackstaxback.com or comes visit us at our Vancouver based office*. We will be more than happy to assist you with your queries and the processing of your tax return. 

*At the date of publishing our Vancouver office is not open for visits due to COVID-19. Please reach our team via email – team@jackstaxback.com