How will my 2020 tax return be affected by COVID-19 relief payments?

There are important things to be aware of before filing your 2020 tax return. Rather than letting 2020 deal you one final blow by being left in that dark over your tax filing, it is best to be prepared. CRA are not the most forgiving government agency, and will not turn a blind eye to penalizing individuals who repeatedly fail to correctly declare all income, even by an honest mistake.

I received CERB/CRB payments; how will this affect my return?

The CERB was introduced as a form of EI payment for those who had lost their employment due to COVID-19, which was subsequently replaced by the CRB payment. Like with other forms of EI, the payments are treated like income, meaning that the payments are taxable. Services Canada are supposed to deduct tax off the payments (sometimes they forget), however the tax deducted is usually a very low percentage. 

If you were working in a high paying role, where you were paying a fairly high percentage in tax, you can be sure that the amount of tax being deducted off your CERB or CRB payment was too low. This means that you will owe a fair bit of tax to CRA at year end. 

If you received CERB/CRB payments during 2020, there is a strong possibility that you will owe some tax to CRA when filing your 2020 tax return. Therefore, it would be advised to save a portion of those payments (if possible), to cover a potential tax balance owing when filing your tax return.

The same applies for those who are considered to be self-employed rather than employed.

If I have a balance owing to CRA, what does this mean?

If you have a balance owing to CRA, this will eventually need to be settled. The payment deadline is typically April 30th of the following year (April 30, 2021 for 2020 tax returns). There is the possibility that it could be extended, however it is best to prepare for the worst-case scenario, which is April 30, 2021. Any tax balances owing which remain after the deadline can be subject to interest penalties from CRA

I was overpaid CERB, what should I do?

If you were accidentally overpaid CERB, it is advisable that the overpaid funds are returned. The funds should be returned as soon as possible, so that any tax forms issued to you by Service Canada show the correct amounts to be declared on your tax return. Errors when filing your tax return are notoriously difficult/slow to be rectified with CRA.

How do I declare the CERB/CRB payments on my tax return?

As with all EI payments, a T4E will be issued by Services Canada to individuals who received the CERB or CRB benefit payment. You should receive a copy in the mail, however you will also be able to access a copy of the T4E through your online Services Canada account. This T4E must be reported when filing your tax return. CRA can apply failure to declare penalties on individuals who repeatedly fail to declare all income on their tax returns. It is unlikely if you are a first time offender, however it is best to declare all income slips on your tax return.

I received large payments for the GST/HST credit, does this affect my return?

The larger payments received by individuals for the GST/HST credit are non-taxable payments, they will have no affect on your 2020 tax return filing. So, it’s not all bad news.

The 2019 tax filing deadline was delayed last year, should I wait this year?

There is a strong possibility that the 2020 tax filing deadline, as well as the tax balance owing payment deadline will be pushed back again this year. However, if you wish to continue to receive GST/HST credit payments on time, you will be required to file your tax return as soon as possible. The 2020 tax filing opening date should be in late February 2021. It is advised to file your return as soon as possible, just in case you have a balance owing, it is better to know where you stand, sooner rather than later.

If you are unsure of filing your 2020 tax return, ask a professional for help

If you are feeling unsure of your 2020 tax filing obligations, you can always ask a professional for assistance. The jackstaxback team is always happy to take the weight off your shoulders and ensure that your return is filed correctly. If you are interested in a free consultation, please message us today. Tax doesn’t have to be taxing.