27 Nov 2020 End of Year Tax Checklist
Although some people have more tax slips than others, there’s basic information that everyone must include on a tax return; whether you are an employee of a company or self employed (Sole Proprietor / Corporation)
We at RMP can ensure you are off to a good start.
Let’s start with the basics for our 2020 End of Year Tax Checklist
Gather Your Paperwork
Gathering your income tax slips is where the real work begins. Before you can file your tax return, make sure you have copies of all your tax slips. Although most tax slips must be mailed by the last day of February, they often arrive at different times. Not all tax slips arrive in the mail; some are sent by email and others are available online (whether you’ve opted to receive them online or not). The most common tax slips are T4 (employment income), T5 (investment income), T4A (pension income) and T2202A (tuition, education and textbook amounts).
10 Common Deductions:
1. RRSP contributions:
Did you save towards retirement this year? If you contributed to your registered retirement savings plan, you should receive a tax slip from your financial institution. Be sure to claim your RRSP contributions on your tax return. It is your responsibility to claim the deduction. CRA will not process your claim on your behalf if not submitted on your tax return.
2. Medical Expenses
Medical expenses are often forgotten. You’re allowed to claim medical expenses for any 12-month period ending in the current tax year. You should keep all of your medical receipts even after filing as CRA may request a copy of these. The amount of medical expenses over the CRA threshold of $2,171 (or 3% of your income, whichever is less) can result in a credit on your return. People are often surprised how quickly out of pocket medical expenses add up. Save those medical receipts!
3. Business expenses:
If you’re self-employed, you can deduct a number of business expenses. The amount you can deduct in a given year depends on whether it’s a current-year expense or a capital expense. Consult the CRA website for a list of allowable expenses. Or allow us to ensure you claim all that you are entitled to. (Note: since you can’t deduct personal expenses, you must deduct only the business part of expenses from business income.) Variations of these expenses are available for self employed or incorporated businesses.
4. Other employment-related expenses:
A number of expenses including parking, meals, lodging and advertising, may be deductible as well. Depending on your circumstances.
5. CERB – Canada Emergency Response Benefit:
Many Canadians faced changes to their source of income during 2020. While income received from an employer has income tax deducted at source, for those individuals who received Canada Emergency Response Benefit (CERB) payments, no income tax was withheld. Because CERB payments are taxable as ordinary income, the amount of tax owing will be calculated at each individual’s marginal tax rate.
The CERB has now transitioned to three new benefits: the Canada Recovery Benefit (CRB), the Canada Recovery Sickness Benefit (CRSB), and the Canada Recovery Caregiving Benefit (CRCB). These benefits are also taxable and the Canada Revenue Agency (CRA) will withhold 10% tax at source from amounts distributed. Depending on how much income a person has earned during the year, the 10% tax withheld at source may not be all the tax that’s required.
For the 2020 tax year, CRA is introducing additional employment income codes for the T4 slip. These codes will report employment income based on COVID-19 payment periods and will allow CRA to validate payments made under the various emergency programs, including CERB.
6. Home Office and COVID19:
If you were forced to work from home as a result of the global COVID19 pandemic, you may be entitled to tax credits/deductions, that normally would not apply to your tax situation. We can help you navigate those opportunities and maximise your tax credits/deductions. Click here for more helpful high level information is also available for your review
You may deduct child care expenses (Line 214). If you’re the only person supporting the child, you can claim these expenses for the time the child was living with you. If the eligible child’s parent, your spouse or common-law partner, or another person claiming the amount for the eligible child is living with you, the person with the lower net income must generally claim the exemptions.
8. Rental income/rental property expenses:
Rental income, as well as qualifying expenses due to upkeep of rental property, are deductible. In addition, Capital Cost Allowance (CCA), based on depreciation of rental property, is another deduction you may be able to take advantage of.
9. Charitable tax credits:
Donations can pay off big at tax time. Donations to qualifying charitable organizations are deductible. The CRA has information on how much can be deducted and how to claim and calculate these deductions. We can help as well.
10. Moving expenses:
You can claim eligible moving expenses (on Line 219) if you move and establish a new home to work or run a business at a new location, or if you move to take courses as a student in full-time attendance enrolled in a post-secondary program at a university, college or other educational institution. To qualify, your new home must be at least 40 kilometres closer to the new place of work or school. Sometimes tax season can help make that move, a bit less expensive.
These are just some basic items to remember when preparing for tax time. Depending on what your situation is for 2020, your taxes may be overwhelming for you and this is where we can help. Book an appointment today so we can help you prepare earlier and let you know what you’ll need and what to expect for your 2020 tax return.