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2020 was an extraordinary year, and by “extraordinary” we mean, of course, terrible, at times super scary, and really, really boring. Congratulations on hanging on. Your reward for making it to 2021? Doing your 2020 taxes, which will likely be more complicated than usual. (Thanks again, COVID!) To help you get ready, we have harnessed the brainpower of our pleasantly nerdy team at Wealthsimple Tax for a special pandemic edition of frequently asked tax questions (FATQs?).
1. How do I report the CERB or CESB income I received?
Like so many Canadians, if you received money from either the Canada Emergency Response Benefit (CERB) or the Canada Emergency Student Benefit (CESB), your first response was probably: thanks, government! It probably wasn’t, uh oh, do I have to pay tax on this money? But it turns out you might. Since most of these benefits were offered with no income tax withheld, that money is taxable. So keep an eye on your mailbox — Service Canada mails T4A slips between January 11 and March 10 to all recipients of these benefits. All you’ll need to do is enter the amounts on the T4A slips just as you would any other income you receive. Want more info? Check out our explainer: “You May Have to Pay Taxes on COVID-19 Benefits.”
2. How will I report the CEWS I received?
Many Canadian businesses received CEWS (Canada Emergency Wage Subsidy) — direct payments from the government to business owners so they could pay their employees and stay afloat. Since no taxes were withheld on these payments, business owners will need to report CEWS payments in the Business Income section of their returns, specifically in the field labelled “Temporary wage subsidy received.”
3. I don’t normally report benefit payments but I received extra emergency benefits this year. Do I need to report these additional amounts?
Because of the COVID-19 pandemic, the government offered additional payments for a variety of programs, including:
Canada child benefit (CCB)
The goods and services tax/harmonized sales tax (GST/HST) credit
Old Age Security (OAS)
The Guaranteed Income Supplement (GIS)
One-time payment to persons with disabilities
You don’t often hear the words “good news” attached to “taxes” but in this case, we have good news! You don’t need to report or pay taxes, even if your benefit payments were higher this year. If you’re still in doubt, consult this handy primer on taxes and COVID-19 benefits.
4. I had to work from home because of COVID-19. Am I able to claim any of my expenses?
Our answer is: yeah, probably! There are two different ways to claim work from home expenses on your 2020 return.
(a) The new temporary flat rate method. They should have just called this the “easy way.” If you worked at home for at least 50% of your time, for a period of at least four consecutive weeks, the CRA will allow you to claim a deduction of $2 per day, up to a maximum deduction of $400. You don’t need to provide a T2200S from your employer (see below) or receipts for any of your expenses.
(b) The detailed method. This one’s more involved but will allow you to claim eligible expenses over and above the $400 cap. First, you’ll need a form from your employer called T2200S: Declaration of Conditions of Employment for Working at Home Due to COVID-19. Then, you’ll need receipts and supporting documents. Before filing, you’ll want to bone up on the CRA’s comprehensive list of allowable expenses. Examples of things that can be claimed: rent, cell phone and internet service plans. Examples of things that cannot be claimed: office equipment, mortgage interest and your daily 5 p.m. negroni.
5. My T4 from my employer looks different this year. What are all these extra boxes and numbers?
Don’t be alarmed — it’s just a one-time change that won’t affect your filing or refund. See, due to the way emergency benefits were calculated, employers need to tell the CRA how much of your salary was earned during four distinct periods of 2020. The CRA will use those boxes as additional checks and balances to confirm what was reported if you claimed emergency benefits during the year.
6. I started driving for Skip The Dishes/Uber/Lyft. How do I report my income and expenses in Wealthsimple Tax?
Well, for starters, may we recommend that you don’t try to do anything tax-related while your car is moving? The type of income earned from all of these companies is considered self-employment income, so you just put your income in the Business Income section of your return. Form T2125, aka the Statement of Business Activities form, which every driver will be required to fill out, will have boxes for your income and itemized deductions for relevant operating expenses, such as mileage and fuel. For further guidance, you may want to make a short pit stop between fares at our detailed Business Income help post.
7. Where is the provincial tuition credit I used to receive each year as a student? I don’t see it calculated.
In 2016, several provinces, including Ontario, Saskatchewan and Alberta, started eliminating their provincial tuition credit, meaning that depending on where you live, there may not be one calculated for you for 2020. (This also means that, sadly, there are no provincial tuition credits available for transfer to a parent or spouse). The federal tuition tax credit is still available, allowing students enrolled in post-secondary education to claim their tuition to reduce their taxable income. They can also transfer up to $5,000 of their tuition credit to a spouse, parent or grandparent.
8. I heard about something called the digital news subscription tax credit. How do I get it?
In 2019, to promote journalism in Canada, the government introduced this mouthful of a tax credit to benefits. It goes to Canadian digital journalistic organizations that create original written news and to their subscribers. Any Canadian taxpayer who subscribes to a so-called “qualified Canadian journalism organization” (QCJO) can receive a 15% tax credit of up to $300 in subscriptions for the years 2020-2024. (For the math disinclined, that’s a maximum annual credit of $75.) If you’re unsure whether a subscription qualifies, check your receipt — qualifying news agencies must provide their QCJO designation number in every subscription receipt.
9. What’s the new Canada training credit and am I eligible?
The Canada training credit (CTC), introduced in 2019, provides support for Canadians to learn new job skills. To qualify, workers must have been between the ages of 26 and 65 at the end of 2020 and meet certain criteria. If you are eligible, you’ll accumulate $250 of tax credits every year until they reach the maximum $5,000. (You don’t have to keep track of this balance yourself, the info will be in your Notice of Assessment and your CRA My Account). You can claim up to half the cost of courses for a given year or your accumulated CTC limit on your Notice of Assessment, whichever is less. If you’re using Wealthsimple Tax, just enter the Canada training credit amount from your Notice of Assessment when prompted and the software will take care of the math.
10. What is the climate action incentive tax credit and can I claim it?
To help make alternative energy sources more attractive, the Canadian government added a federal carbon tax onto gasoline and home heating fuels in four provinces: Alberta, Saskatchewan, Manitoba, and Ontario. Residents in those provinces may claim the climate action incentive payment on tax returns and only one person per household can claim the credit. An additional 10% of the claim amount is available to residents of small or rural communities since many who live in remote areas need to drive further to work. (The CRA has a handy tool to determine if your town is small and remote enough to qualify for the 10% bump.)
11. Since cannabis is now legal, can I claim it as a medical expense on my tax return?
Getting paid by the government to smoke weed? A dorm-room fantasy of ten years ago is (if the cannabis is medically prescribed) now a reality. While cannabis is legal, to claim it as a medical expense, a few criteria must be met as set out here by the CRA. You must have a medical document as defined in the Cannabis Regulations, be registered as a client or holder of a licence for sale, and make your cannabis purchases from that licence holder.
12. I keep trying to get through to the CRA. What is the best time to contact them?
So, you’re not the type that enjoys hearing “your call is important to us” about 300 times? Us neither. Luckily, the CRA now has a nice feature found here in which they not only provide specific toll-free numbers for your particular query, but they also provide estimated wait times to speak to a CRA representative.
13. I’m switching to Wealthsimple Tax. What information do I need from last year’s return?
Very little, we promise. Booking a plane ticket is harder. For the vast majority of Canadians, switching over to Wealthsimple Tax is super easy. The hardest part of the sign-up process is just filling in your personal information, like your name, address, and SIN. Those who already have a CRA My Account will find that the auto-fill feature will populate most boxes you need, including your RRSP information. Filers whose taxes tend to be a bit more involved may need to track down a number or two. (A fairly comprehensive list of those particular situations can be found here.)
14. What sort of information is available in CRA My Account?
Want to know the detailed status of your tax return? Or how much room you have in your TFSA? Want to know the gender of a future child? The CRA My Account offers two of three of those things. A complete list of available information and documents found in CRA My Account can be accessed here.
15. Do I need a CRA My Account to file my return with Wealthsimple Tax?
No, you don’t need one, but if you like saving time, you’ll probably want one. If you hope to use Wealthsimple Tax’s auto-fill feature to import your CRA tax slips, you’ll need to be signed up with CRA My Account. Sign up here.
16. This is the first tax return I’ve filed in Canada. How do I sign up for CRA My Account?
Congrats on this milestone, you tax filer, you! To sign up, whether you’re new to the country or you’ve lived here your whole life, you will first have to file your return and wait for the CRA to assess it. Once you receive the Notice of Assessment, you can sign up here for CRA My Account.
17. I moved to Canada in 2020. What do I do about the money I earned before I moved? Will it affect my return?
It may affect your tax credits, but not how much you have to pay. If you’re filing with Wealthsimple Tax, you’ll need to enter the income earned before moving to the country. You’re not taxed on that income, but that amount will be used to determine if you’re eligible for full Canadian tax credits for 2020 or if we need to prorate your tax credits based on when in the year you became a resident (see this CRA page for more information).
18. I sold a rental property I owned this year. Do I need to report that in the tax return?
Congratulations! I hope you made a bundle. Yes, indeed, you will need to report the transaction on your tax return. There are a few steps to consider:
(a) If you previously claimed depreciation/capital cost allowance (CCA) on this rental property, you’ll need to enter the amount of the sale in the CCA tab found in Rental Income. You may have Recaptured CCA, which will increase your rental income for the year.
(b) You will need to report the sale to determine a Capital Gain or a Capital Loss. Use the Capital Gains (or Losses) section to enter the details of the rental property sale.
The type will be “Real estate, depreciable property”
Proceeds of disposition: This is the selling price of the property minus any expenses incurred to sell it (legal fees, etc.)
ACB (adjusted cost base): The price you originally purchased the property for
Outlays: Any other eligible expenses you incurred selling the property that hasn’t been claimed anywhere else
Is it possible we forgot the specific question that you’ve frequently been asking all tax season? Possibly! But you may find the answer in our amazingly informative (and, given the topic, surprisingly entertaining) Personal Finance 101 or Tax Help Centre pages. Still feeling like your particular question remains unaddressed? Don’t hesitate to pass on your nominee for future FAQ to our team of actual humans at email@example.com.
Andrew Goldman has been writing for over 20 years and investing for the past 10 years. He currently hosts "The Originals" podcast and writes about personal finance and investing for Wealthsimple. Andrew's past work has been published in The New York Times Magazine, Bloomberg Businessweek, New York Magazine and Wired. He and his wife Robin live in Westport, Connecticut with their two boys and a Bedlington terrier.