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Tax Filing in 2021: The Age of COVID-19

By March 25, 2021March 29th, 2021No Comments

Tax time provokes many headaches for small business owners. There are enough tax filing rules, considerations, and items that you absolutely cannot miss, to begin with, especially if you don’t want to raise any red flags with the Canada Revenue Agency (CRA). This year, there are additional rules to tax filing season—courtesy of COVID-19.

Socially distanced activities like Zoom calls, starting new indoor hobbies (think puzzles and baking), and drinking copious amounts of wine (to cope) are only some to name. But there are a few other considerations that you should know about—particularly when it comes to filing your 2020 tax return.

Here’s what you need to know when filing:

Tax Filing in 2021: The Age of COVID-19

Plan ahead this tax-filing season

Do you typically file a paper tax return? You might want to re-think that choice. This year, the pandemic will likely affect your tax filing ability. Effects can range from slowing down your assessment, or triggering complications around getting your refund. If you currently work with an accountant, they’ll likely encourage you to file digitally—just like how you will meet them digitally, too.

This year, online filing opens on February 22, 2021. However, you can still choose to take a physical approach to tax filing. Just note that it may take anywhere between 10-12 weeks for the CRA to issue you your assessment due to on-site processing limitations in tax centers.

Luckily, the CRA is anticipating this surge in demand. So, you can expect additional call agents to increase call center capacity and operations to get your questions answered.

How to file if you received COVID-19 emergency benefits

COVID-19 was a hard year for Canadians. Many individuals and business owners lost their jobs or had to close shop. As if the idea of many people losing their jobs isn’t bad enough, the Canadian Federation of Independent Business (CFIB) released a recent January 2021 survey that shows 1 in 6 businesses are at risk of closing. That’s a whopping total of 181,000!

In addition, many CFIB survey responses made it crystal clear that “government programs (like Canada Emergency Wage Subsidy (CEWS), Canada Emergency Rent Subsidy (CERS), Canada Emergency Business Account (CEBA) or provincial small business relief programs) were crucial for business survival in 2021.”

You’re not alone when it comes to relying on government emergency benefit programs, like the ones listed below:

  • CERB
  • Canada Emergency Student Benefit (CESB)
  • Canada Recovery Benefit (CRB)
  • Canada Recovery Sickness Benefit (CRSB)
  • Canada Recovery Caregiving Benefit (CRCB)
Did you know? You can also check out CRA’s Get Ready page, which has information about filing, deadlines, and CRA services to help you through tax filing season.

Conclusion: You’ve got this!

Tax filing is never easy, and the pandemic doesn’t help at all. Whether it’s planning ahead, knowing how to file for emergency benefits, knowing the newly introduced benefits, or going digital, you’ve got this. You started your business and you made it this far. With the right mindset, awareness, and tools, tax filing should be a piece of cake this year.

Looking to prep for tax filing in the age of COVID-19? Sign up for the TrulySmall Accounting free 14-day trial to explore our delightful features to find out how you can go into tax season feeling confident.

try trulysmall accounting

Note: Residents of Quebec residents will receive both a T4A and RL-1 slip from the CRA. However, the RL-1 slip will not be available for viewing in My Account.

And don’t forget…

These emergency benefits are taxable. You might owe tax, or the opposite might happen. You might owe zero tax and even be entitled to a refund. It all comes down to how much income you earned from all sources, as well as deductions and credits that you’re entitled to claim.

New work from home benefits for Canadians

Did you work from home this year? If your company transitioned to remote work, then you may just be eligible for the flat rate in Canada.

New ‘Flat Rate’ deduction for remote working

In the age of COVID-19, working from home has become the norm. But no commutes, more breaks, and better work life harmony aren’t the only benefits for small business owners. This year, Canada introduced a brand-new ‘flat-rate deduction for anyone working from home. Anyone—including employees—who meet the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses.

Edward Rajaratnam, Executive Director at EY Canada, recommends two different strategies for homeowners and renters:

For Homeowners: “The detailed method may be better for renters than homeowners because of their ability to claim a portion of their rent, which could increase the size of their deduction beyond the $400 cap placed on the flat rate option.”

For Renters: “The beauty of this is it is a flat rate. It is $2 a day up to a maximum of $400. The second beauty of that is that you actually do not need to maintain receipts. You don’t get to count days off, vacation days, sick leave days or other leaves of absence, so you might not reach the 200 days needed to max out the flat rate claim of $400. However, they don’t have to be full days of work to qualify. Even if you only worked part of the day, you can claim the $2 for that day.”

Read more about the eligibility criteria here.

Go digital with your tax filing

As with other COVID activities, going digital this tax filing season should be another consideration—especially if you want to receive your notice of assessment (NOA) and refund faster and to avoid delays. You can either file online or sign up for direct deposit.

How Kashoo complements your tax filing this year

A cloud-based, secure solution to manage your transactions for easy filing. Managing your business expenses is easy with Kashoo through our bank feed connect feature. By connecting your business bank account, all of your transactions flow seamlessly into Kashoo. From there, you can review, sort, and sift through income and expenses throughout the year, instead of at tax-filing time. As your bookkeeping powerhouse, you can easily export data such as total account income, or expenses that tell you what you can and cannot claim as tax credit.

Smart scanning & matching features to help you save time. Tax filing is a lot of work. You need to set time aside, and not to mention it’s a focus-heavy task. With TrulySmall Accounting, you get access to our built-in optical character recognition (OCR) scanning for your receipts and their corresponding transaction. For example, if you received payment from your client, your bank feed will pull that data, scan the information, then match it to the corresponding invoice that you create via the Invoices tab.

Did you know? You can also check out CRA’s Get Ready page, which has information about filing, deadlines, and CRA services to help you through tax filing season.

Conclusion: You’ve got this!

Tax filing is never easy, and the pandemic doesn’t help at all. Whether it’s planning ahead, knowing how to file for emergency benefits, knowing the newly introduced benefits, or going digital, you’ve got this. You started your business and you made it this far. With the right mindset, awareness, and tools, tax filing should be a piece of cake this year.

Looking to prep for tax filing in the age of COVID-19? Sign up for the TrulySmall Accounting free 14-day trial to explore our delightful features to find out how you can go into tax season feeling confident.

try trulysmall accounting

Did you know? The CRA and Service Canada processed more than 27 million Canada Emergency Response Benefit (CERB) applications—totaling more than $81 billion in payments to Canadians.

Look out for your T4A and T4E tax filing slips

If you received any of the above benefits, you’ll receive a T4A (for benefits issued by the CRA) and a T4E (for benefits issued by Service Canada) tax slips in the mail. Alternatively, you can view them online under My Account.

Note: Residents of Quebec residents will receive both a T4A and RL-1 slip from the CRA. However, the RL-1 slip will not be available for viewing in My Account.

And don’t forget…

These emergency benefits are taxable. You might owe tax, or the opposite might happen. You might owe zero tax and even be entitled to a refund. It all comes down to how much income you earned from all sources, as well as deductions and credits that you’re entitled to claim.

New work from home benefits for Canadians

Did you work from home this year? If your company transitioned to remote work, then you may just be eligible for the flat rate in Canada.

New ‘Flat Rate’ deduction for remote working

In the age of COVID-19, working from home has become the norm. But no commutes, more breaks, and better work life harmony aren’t the only benefits for small business owners. This year, Canada introduced a brand-new ‘flat-rate deduction for anyone working from home. Anyone—including employees—who meet the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses.

Edward Rajaratnam, Executive Director at EY Canada, recommends two different strategies for homeowners and renters:

For Homeowners: “The detailed method may be better for renters than homeowners because of their ability to claim a portion of their rent, which could increase the size of their deduction beyond the $400 cap placed on the flat rate option.”

For Renters: “The beauty of this is it is a flat rate. It is $2 a day up to a maximum of $400. The second beauty of that is that you actually do not need to maintain receipts. You don’t get to count days off, vacation days, sick leave days or other leaves of absence, so you might not reach the 200 days needed to max out the flat rate claim of $400. However, they don’t have to be full days of work to qualify. Even if you only worked part of the day, you can claim the $2 for that day.”

Read more about the eligibility criteria here.

Go digital with your tax filing

As with other COVID activities, going digital this tax filing season should be another consideration—especially if you want to receive your notice of assessment (NOA) and refund faster and to avoid delays. You can either file online or sign up for direct deposit.

How Kashoo complements your tax filing this year

A cloud-based, secure solution to manage your transactions for easy filing. Managing your business expenses is easy with Kashoo through our bank feed connect feature. By connecting your business bank account, all of your transactions flow seamlessly into Kashoo. From there, you can review, sort, and sift through income and expenses throughout the year, instead of at tax-filing time. As your bookkeeping powerhouse, you can easily export data such as total account income, or expenses that tell you what you can and cannot claim as tax credit.

Smart scanning & matching features to help you save time. Tax filing is a lot of work. You need to set time aside, and not to mention it’s a focus-heavy task. With TrulySmall Accounting, you get access to our built-in optical character recognition (OCR) scanning for your receipts and their corresponding transaction. For example, if you received payment from your client, your bank feed will pull that data, scan the information, then match it to the corresponding invoice that you create via the Invoices tab.

Did you know? You can also check out CRA’s Get Ready page, which has information about filing, deadlines, and CRA services to help you through tax filing season.

Conclusion: You’ve got this!

Tax filing is never easy, and the pandemic doesn’t help at all. Whether it’s planning ahead, knowing how to file for emergency benefits, knowing the newly introduced benefits, or going digital, you’ve got this. You started your business and you made it this far. With the right mindset, awareness, and tools, tax filing should be a piece of cake this year.

Looking to prep for tax filing in the age of COVID-19? Sign up for the TrulySmall Accounting free 14-day trial to explore our delightful features to find out how you can go into tax season feeling confident.

try trulysmall accounting