Personal tax season has arrived, and it is time to get ready to file your 2021 tax return! This article will not only remind you of the requirements related to your filing obligations, but also help you understand some of the new tax changes for 2021.
Deadline for Filing and Payment
The filing deadline for individuals is April 30th. Since April 30th falls on a weekend this year, the due date is the following business day, being May 2nd, 2022. Conversely, the filing deadline for self-employed individuals for 2021 is June 15, 2022. The deadline to pay income tax balance owing for both individuals and self-employed individuals is also April 30th. However, similar to the personal tax deadline, since April 30th is on a weekend this year, the deadline to pay income tax balance owing is extended to May 2nd, 2022.
If you file your return late or pay the balance owing after the deadline, you may be charged interest and penalties. Filing your income tax return on time will also help to prevent a disruption to your benefit and credit payments, such as GST/HST credit, Canada child benefit (CCB), and old age security (OAS) benefits.
Income Tax Instalments
You may be required to pay tax instalments for 2022 if your net tax owing for 2022 is projected to be more than $3,000 and the actual net tax owing in either 2021 or 2020 was more than $3,000. The first income tax instalment payment for taxation year 2022 is due by March 15, 2022 with following quarterly payments due on June 15th, September 15th, and December 15th.
COVID-19 Benefit Payments
If you received COVID-19 benefit payments, such as the Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), or Canada Recovery Caregiving Benefit (CRCB), you should receive a T4A slip. Most of the above benefits were subject to 10% income tax withholding when you received the benefit payment. Depending on your total income in the year, you may have a tax balance owing on the filing of your 2021 personal tax return from the receipt of these benefits.
If you are self-employed and received COVID-19 government assistance for your business, such as the Canada Emergency Wage Subsidy (CEWS), Canada Emergency Rent Subsidy (CERS), or Canada Recovery Hiring Program (CRHP), you have to include the amount of benefits received in your business income as these benefits are taxable.
COVID-19 Benefit Repayments
If you received the CRB, you may have to repay all or part of the amount received if your net income after certain adjustments is more than $38,000.
If you repaid certain COVID-19 benefits in 2021 that you received in 2020, the amount repaid will be reported on your T4A slip or on your T4E slip and can be claimed as a deduction against your taxable income. You can choose to claim a deduction for the repayment in the year that the benefit was received or in the year that the benefit was repaid. You may also choose to split the deduction between these two years.
Home Office Deductions for Employees
Similar to 2020, as an employee, you may be able to claim home office expenses if you worked from home in 2021 under one of the following two methods:
Temporary Flat Rate Method
The temporary flat rate method is a simplified method to claim home office expenses deduction. You are eligible to use this method if you worked more than 50% of the time from home for a period of at least four consecutive weeks in the year due to the COVID-19 pandemic.
If you are eligible, you can claim $2 for each day you worked from home in the year up to a maximum of $500 (increased from $400 from 2020) per individual in 2021.
Under the flat rate method, your employer is not required to complete and sign Form T2200/T2200S. Additionally, you are not required to keep documents to support your deduction.
Under the detailed method, you can claim the deduction based on actual amounts you paid, including utilities, maintenance and rent. The amount can be deducted is based on the size and use (employment and personal portion) of your workspace. Also note that employees who don’t earn a commission would not be eligible to claim insurance or property taxes paid. As a result, the calculation of the deductions that you may claim using this method are more complicated.
In addition, you will be required to keep documents to support the deduction and you must obtain a signed Form T2200/T2200S from your employer.
Climate Action Incentive
The Climate Action Incentive (CAI) used to be refundable when filing the income tax return to residents of certain provinces, including Ontario. Starting with the 2021 taxation year, the CAI will not be included annually in the personal income tax return. Instead, the amount will be paid quarterly starting July 2022. You are required to file your 2021 income tax return to receive the payments.
Ontario Senior’s Home Safety Tax Credit – 2021 and 2022
The Ontario government introduced the Senior’s Home Safety tax credit for 2021 and 2022 taxation years. It is a 25% credit on the eligible expenses up to a maximum of $10,000, which could result in a maximum of $2,500 refund.
The credit can be claimed by the senior or family members who live with the senior. The eligible expenses include renovations that permit a first-floor occupancy or a secondary suite for a senior, grab bars, non-slip flooring, wheelchair ramps and elevators.
Ontario Staycation Tax Credit – 2022
The temporary Ontario Staycation Tax Credit is now effective. Ontario residents can claim 20% refundable credit of their eligible 2022 accommodation expenses (i.e., for a stay at a hotel, cottage, bed-and-breakfast accommodations, or campground) when filing their personal income tax return for 2022. You can claim eligible expenses of up to $1,000 for an individual or $2,000 for a family, to get back up to $200 or $400 respectively.
If you are planning on a short-term vacation within the province, remember to keep your receipts.
It is important to stay on top of your personal tax filings and make sure you file your personal tax return on time. If you have any questions or need assistance with preparing your personal tax return for 2021, please feel free to reach out to us.
Mandeep Khosa, CPA, CA
Elise Liu, CPA, CA, MMPA
Manager – Taxation