With tax season now in full swing, here are five things to keep in mind as your clients bombard you with tax questions over the next six weeks.
The deadline
While the normal tax-filing deadline for most individuals is April 30, this year, because April 30 falls on a Saturday, taxpayers have until May 2 to file. If the taxpayer (or their spouse or common-law partner) had self-employment income in 2021, they have until June 15 to file their returns.
In either case, however, any balance owing must be received or processed at a Canadian financial institution on or before May 2 to be considered paid on time.
Covid-19 benefits
Clients who received Covid benefits issued by the Canada Revenue Agency (CRA) in 2021, such as the Canada Recovery Benefit, will have received a T4A tax slip from the government last month. (Quebec residents would also have received an RL-1.)
It’s important to keep in mind that when Covid-19 benefits were paid, some tax was withheld at source, but additional tax may still be owing. The CRA has acknowledged that this could present significant financial hardship to some taxpayers. If your clients are affected, they may wish to take advantage of the CRA’s expanded payment arrangements, which will give them more time and flexibility to pay the tax owing, based on their financial situation.
They can also use CRA’s online Payment Arrangement Calculator to develop a proposed payment arrangement plan to pay off debt.
One-time payment for seniors
Seniors who were eligible for the Old Age Security pension in June 2021 and were born on or before June 30, 1947 (meaning they will turn 75 by July 1, 2022), received a one-time $500 payment in August 2021. All eligible seniors got the $500 payment, regardless of income level. The payment was meant to “support older seniors’ higher expenses,” and was estimated to apply to 3.3 million seniors.
By now, most eligible seniors will have received a T4A slip from Service Canada for this amount. A small number of Canadians received an incorrect slip, with duplicate amounts in boxes 018 and 205. Amended slips were issued to these individuals, so it’s important that they use the most up-to-date slip when filing their 2021 returns.
Home-office expenses
If you have clients who worked from home in 2021 due to Covid, they may be eligible to claim a deduction of up to $500 annually for home-office expenses in 2021 using the temporary flat-rate method. Or they may be able to claim their actual expenses under the detailed method. Having trouble deciding which method to choose? Check out my January 2022 Inside Track column where I go into more detail.
Climate action incentive payments
Finally, if your clients are residents of Alberta, Saskatchewan, Manitoba or Ontario, they may be wondering what happened to the climate action incentive (CAI), which is absent from the 2021 tax returns. As of 2021, the CAI payment isn’t claimed on the return but instead will be automatically paid four times a year, starting in July 2022, provided the client files a 2021 return and qualifies for payments. The July payment will include a retroactive amount for April 2022, and, going forward, payments will be made on the 15th of October, January, April and July.
Jamie Golombek, CPA, CA, CFP, CLU, TEP, is the Managing Director, Tax & Estate Planning with CIBC Private Wealth in Toronto.