If you received CERB funds in 2020, there’s a chance you’re in for a tax hit when you file this year. Kim Parlee talks to Zeljka Walker, a portfolio manager and investment advisor with TD Wealth, about some ways the pandemic may change the way we file this year and how to manage a tax repayment.
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- It may feel like you've just filed your taxes, because of course, you had until June to file your taxes last year. But doesn't look like that's going to be the case this year, which means the deadline is fast approaching. My next guest says as well, for those who have received some sort of government assistance, such as CERB, the Canadian Emergency Response Benefits, it's even more important to get your house in order early. Or it could have a big impact on your tax bill.
Zeljka Walker is a Portfolio Manager and Investment Advisor with TD Wealth. She joins us from Vancouver. Zeljka, it's always great to have you with us, and let's just start with the basics. Timing, the deadline this year looks to be back to what it used to be.
- Exactly. Thank you for having me. Glad to be back. Yes, unlike last year where we did have that deadline, as you mentioned, this year it's back to normal. April 30th is the cutoff date, and it is time to start thinking about it, because that's only three months away.
- Yeah, and there's more complexities, as you want to highlight I know in this conversation. And let's start with CERB. Because of that, some people may end up with a higher tax bill.
- Exactly. I mean there were benefits the first time the government offered last year, and many Canadians took up the government with that. However, what they may not realize is, CERB is actually taxable. And you may have a surprise at the end of the tax season when you start applying, to find out you do owe some of that tax back.
So it is very important to start early, start planning, because the CERB for some people who applied may not even be eligible for it. In fact, they may even be at risk to pay all of it back, or some of it back. But certainly the benefits are taxable, and we need to start planning for that, as soon as possible.
- And my understanding too is that, if you missed the deadline just with taxes, there's penalties and interest to accrue with that as well.
- Absolutely. Again, April 30th is the deadline to file your taxes, but it's also the deadline when you have to pay your taxes back. So what I'm suggesting is for everyone to start planning ahead. Find out now, as early as possible, if you do owe anything, and budget for that. Because you don't want April to be coming up and you have this big tax bill to pay and you haven't planned for it to have any savings to account for that. And interest will accrue from that day on.
- And I guess the hard part too, with this year just being unusual, because I think for most people, they have some regularity, consistency in terms of what they can expect. So if you have an unexpected bill come up on April 30th, that puts you at risk of just cash flow and other obligations you might have.
- Absolutely. I mean I think it's important for everyone to actually look at what their cash flow is now. Look at what your expenses are. You may know your monthly expenses, but then you'll have these bigger unexpected ones, and the tax bill is one of those. Could be surprises that you'll find out.
So I'd suggest start preparing your receipts, start planning, perhaps go on the CRA site into my account to see what one of your RSP and tax-saving account have room. If you had savings to put in there. And two, file early to find out if you do, in fact, need to pay taxes, so you can account for that and plan for it.
- It's interesting you say that because I think from the people I've spoken to, we are seeing what I'm going to say is a bifurcation. There's those who have received CERB and obviously have needed it and have to manage that. And there's others that are actually putting away some cash at the same time, and have the opportunity, to your point, to kind of put it away and put it to work at the same time.
- Yes, absolutely. So many people, many of the Canadians, have experienced that. Hey, you know, I haven't been traveling, I haven't been eating out, I haven't been going to events or shows, I have this surplus of savings. What do I do with it?
Well this is an opportunity where you can actually start investing that money, top up your RSP's, your tax free savings accounts, for instance, or even pay down some of your debt. But certainly do something with it, for sure.
- Another thing that is different this year is, we are where we are right now as we talk right now, we're working from home. So there are some changes in what the CRA is saying is acceptable for work from home expenses.
- Yes, CRA actually introduced this simplified deduction for working from home. So employees who were asked to work from home, and have been at least 50% of their time, are eligible to get about $2 a day for 200 days, or $400 deduction from CRA. You don't have to submit any forms or receipts. That's just applied to you automatically, if you claim for it.
However, if your expenses are higher than that, then you will have to present proof of expenses. And also, if you're self-employed, no changes there. You would have to kind of submit the same old receipts and documents that you would in the past.
- All right, so again, we are just a few months and counting, it's going to sneak up on us and I know. Any final thoughts for people in terms of just what to get ready for that April 30 time?
- Yeah, well, the main thing is start early. That's my main message to the viewers today. We're only three months away. Start planning. Because if you don't expect to get a T4 because you've lost your job or whatnot, or T5 from investments, but you did claim some benefits, you will be getting a T4A slip, which you do have to report, which means some taxes are owed. So start with that.
Also, as I mentioned earlier, go to the CRA site, go to my accounts, and register for it if you haven't. And find out exactly where you're at with your taxes, what your contribution rooms are. And also, remember the deadlines. April 30, back to April 30 as your deadline for taxes.
April 30 is when you're going to accrue any interest if you don't owe on taxes. And also RSP deadline, don't forget that is March 1st. So those are the kind of main ones I want the viewers to remember.
- Those are good ones. Zeljka, always a pleasure. Thanks so much.
- Thank you. Nice to see everyone.
[MUSIC PLAYING]
- It may feel like you've just filed your taxes, because of course, you had until June to file your taxes last year. But doesn't look like that's going to be the case this year, which means the deadline is fast approaching. My next guest says as well, for those who have received some sort of government assistance, such as CERB, the Canadian Emergency Response Benefits, it's even more important to get your house in order early. Or it could have a big impact on your tax bill.
Zeljka Walker is a Portfolio Manager and Investment Advisor with TD Wealth. She joins us from Vancouver. Zeljka, it's always great to have you with us, and let's just start with the basics. Timing, the deadline this year looks to be back to what it used to be.
- Exactly. Thank you for having me. Glad to be back. Yes, unlike last year where we did have that deadline, as you mentioned, this year it's back to normal. April 30th is the cutoff date, and it is time to start thinking about it, because that's only three months away.
- Yeah, and there's more complexities, as you want to highlight I know in this conversation. And let's start with CERB. Because of that, some people may end up with a higher tax bill.
- Exactly. I mean there were benefits the first time the government offered last year, and many Canadians took up the government with that. However, what they may not realize is, CERB is actually taxable. And you may have a surprise at the end of the tax season when you start applying, to find out you do owe some of that tax back.
So it is very important to start early, start planning, because the CERB for some people who applied may not even be eligible for it. In fact, they may even be at risk to pay all of it back, or some of it back. But certainly the benefits are taxable, and we need to start planning for that, as soon as possible.
- And my understanding too is that, if you missed the deadline just with taxes, there's penalties and interest to accrue with that as well.
- Absolutely. Again, April 30th is the deadline to file your taxes, but it's also the deadline when you have to pay your taxes back. So what I'm suggesting is for everyone to start planning ahead. Find out now, as early as possible, if you do owe anything, and budget for that. Because you don't want April to be coming up and you have this big tax bill to pay and you haven't planned for it to have any savings to account for that. And interest will accrue from that day on.
- And I guess the hard part too, with this year just being unusual, because I think for most people, they have some regularity, consistency in terms of what they can expect. So if you have an unexpected bill come up on April 30th, that puts you at risk of just cash flow and other obligations you might have.
- Absolutely. I mean I think it's important for everyone to actually look at what their cash flow is now. Look at what your expenses are. You may know your monthly expenses, but then you'll have these bigger unexpected ones, and the tax bill is one of those. Could be surprises that you'll find out.
So I'd suggest start preparing your receipts, start planning, perhaps go on the CRA site into my account to see what one of your RSP and tax-saving account have room. If you had savings to put in there. And two, file early to find out if you do, in fact, need to pay taxes, so you can account for that and plan for it.
- It's interesting you say that because I think from the people I've spoken to, we are seeing what I'm going to say is a bifurcation. There's those who have received CERB and obviously have needed it and have to manage that. And there's others that are actually putting away some cash at the same time, and have the opportunity, to your point, to kind of put it away and put it to work at the same time.
- Yes, absolutely. So many people, many of the Canadians, have experienced that. Hey, you know, I haven't been traveling, I haven't been eating out, I haven't been going to events or shows, I have this surplus of savings. What do I do with it?
Well this is an opportunity where you can actually start investing that money, top up your RSP's, your tax free savings accounts, for instance, or even pay down some of your debt. But certainly do something with it, for sure.
- Another thing that is different this year is, we are where we are right now as we talk right now, we're working from home. So there are some changes in what the CRA is saying is acceptable for work from home expenses.
- Yes, CRA actually introduced this simplified deduction for working from home. So employees who were asked to work from home, and have been at least 50% of their time, are eligible to get about $2 a day for 200 days, or $400 deduction from CRA. You don't have to submit any forms or receipts. That's just applied to you automatically, if you claim for it.
However, if your expenses are higher than that, then you will have to present proof of expenses. And also, if you're self-employed, no changes there. You would have to kind of submit the same old receipts and documents that you would in the past.
- All right, so again, we are just a few months and counting, it's going to sneak up on us and I know. Any final thoughts for people in terms of just what to get ready for that April 30 time?
- Yeah, well, the main thing is start early. That's my main message to the viewers today. We're only three months away. Start planning. Because if you don't expect to get a T4 because you've lost your job or whatnot, or T5 from investments, but you did claim some benefits, you will be getting a T4A slip, which you do have to report, which means some taxes are owed. So start with that.
Also, as I mentioned earlier, go to the CRA site, go to my accounts, and register for it if you haven't. And find out exactly where you're at with your taxes, what your contribution rooms are. And also, remember the deadlines. April 30, back to April 30 as your deadline for taxes.
April 30 is when you're going to accrue any interest if you don't owe on taxes. And also RSP deadline, don't forget that is March 1st. So those are the kind of main ones I want the viewers to remember.
- Those are good ones. Zeljka, always a pleasure. Thanks so much.
- Thank you. Nice to see everyone.
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