Are you aware of the COVID-19 tax changes in effect? We just passed tax season, and most people would have received their tax refund by now.
Normally, that would have meant April 30, 2020, would be the deadline. Then, you would either collect your tax cheque or prepare for the income tax payments you owe.
But this year is much different because of the COVID-19 pandemic. The coronavirus COVID-19 is playing a major role and requiring us to social distance from each other.
Many people are unable to go to work. This virus is affecting many parts of life, including tax season.
But there is some good news. The government is giving people more time to file their taxes. Extended deadlines are in response to remote working and financial hardship.
It might be harder to work with tax professionals who are working remotely, whether it’s for your individual income tax filing or business.
If you didn’t already know, the CRA extended the filing due date. That means you are still not too late to file your taxes. See below for more details on the COVID-19 tax changes you should know about.
Extended Filing and Payment Deadlines
The primary COVID-19 tax changes come with extended tax filing deadlines. In addition, tax payment deadlines got the same treatment. That means if you owe money after filing, you have more time to pay.
The new deadline to file your tax return is June 1, 2020, for the 2019 tax year. The deadline to pay anything you owe is September 1, 2020. This gives you more time to get the information you need to file your taxes or prepare to handle your tax liability and payments. So, even if you file by August 31, 2020, you’ll be okay.
It also gives you more time to make payments if necessary. The CRA will not charge you a penalty for being late if you pay by September 1.
Businesses can also defer payments until September 1, 2020, on balances due and installments. Large and small organizations do not have to worry about interest or penalties during this time period. Nor will there be any tax audits for small or medium businesses during this time. For small organizations, this will help ease their worries.
Right now, there are no extensions for filing GST/HST sales tax returns. But no late filing penalty will incur if a return is filed late, as long as it’s filed by June 30, 2020. The deadline to remit GST/HST from March 27, 2020, to May 31, 2020, is now June 30, 2020.
Trusts can also defer their tax filing deadline to May 1, 2020, for the 2019 tax year. And balances owing can be accepted up to September 1, 2020, with interest and penalties waived.
The CRA now accepts electronic signatures, which should help people and businesses connect with their tax professionals without having to risk exposure to the virus.
But if you can file on time, you should. Certain benefits are calculated using your return. This includes the Canada Child Benefit.
If you delay your filing, you delay getting those benefits. Naturally, the faster you file your taxes, the faster you can get that money.
Penalties and Interest Relief for Extended Deadlines
While the COVID-19 tax changes are a welcome relief, there may be situations that don’t apply to the information provided above. The CRA handles these on a case-by-case basis.
If you get reassessed for whatever reason, you can file a Notice of Objection. This will explain your reasons for objecting to the reassessment. It will also include all the facts needed to prove your point.
File Online Instead
Many Canadians file their taxes by filling out paper documents and then mailing them in. But this can cause delays.
Much like other sectors hit by the virus, the CRA is experiencing delays in processing paper income tax returns. The backlog means there could be interruptions in your filing and payments.
But there is a better and faster way to file your taxes and make payments for taxes owing. Filing online is optimum.
If you file your 2019 taxes online by June 1, the filing may go through much faster. And if you are expecting to get refunds in return, registering for direct deposit can be a way to ensure those necessary funds reach your account quickly.
Other Ways the Federal Government is Helping During COVID-19
Extending tax filing deadlines is just one way the government is helping out. There are a few available financial benefit programs.
Employment Insurance (EI)
Employed people can apply for employment insurance (EI) if they stopped working because of COVID-19. EI pays out benefits for people who are out of work but who were employed with insurable employment. You will need to qualify to get employment insurance benefits.
To qualify, you need to have worked between 420 and 700 hours over the last year. You need to have paid into the EI program as well. You also need to show that you have been out of work because of COVID-19.
But what about people who are not employees? What about freelancers? Or self-employed people? Or businesses?
The government has benefits for these people, too.
Canada Emergency Response Benefit (CERB)
The Canada Emergency Response Benefit (CERB) provides benefits to people who have lost their income because of COVID-19. People who have already applied to EI should not apply for CERB. A medical certificate is no longer a requirement for EI claims to start March 15, 2020, or later.
This benefit pays $500 a week for up to 16 weeks to eligible workers. People need to qualify for this benefit. To qualify, workers must have earned $5,000 in 2019 or in the 12 months before applying.
People can still earn income to be eligible. They can earn up to $1,000 a month to collect CERB. The benefit is also for seasonal workers who ran out of regular EI benefits and can’t work because of COVID-19.
Canada Emergency Business Account (CEBA)
Businesses also have financial help from the federal government. Many businesses have suffered because of the pandemic.
Restaurants, bars, hair salons, and many others have had to shut down. That means there is virtually no income coming in. Both the business owners and employees are suffering financially because of this.
But businesses are getting help from the government. The Canada Emergency Business Account (CEBA) was developed to help. This benefit provides an interest-free loan of up to $40,000 for small businesses and nonprofits.
The benefit is meant to help cover operating costs. This will be a big help when revenues decrease.
Businesses have to qualify to get CEBA. They will have to show that they paid between $20,000 to $1.5 million in payroll in 2019. Businesses can apply for CEBA through their banks
Homeowners and landlords can also provide have some help. People who can’t afford to make their mortgage payments can apply to defer their mortgage payments through their banks.
A mortgage deferral means you will stop your mortgage payments for a certain amount of time. Of course, your bank must agree to the terms.
When the mortgage deferral ends, your mortgage payments go back to normal. You will then repay any missed payments, including interest.
This is also helpful for landlords. Many tenants are not able to make their rent because of lost income, so some may temporarily suspend rent payments. Speak to your landlords about it.
This might help tenants, but not landlords. They still have to pay their mortgages. But with no rent coming in, there’s no money to cover these mortgage payments.
In this case, a mortgage deferral might help. But you should know that mortgage deferral doesn’t mean forgiveness. You will still have to pay that money back at some point.
That means interest will still accumulate. You will need to understand this before you consider stopping your mortgage payments through mortgage deferral.
People are having a hard time financially because of the virus. Many businesses have shut down, resulting in thousands of individuals losing their jobs.
The coronavirus aid relief and economic stimulus programs are available to Canadians in need.
Not only is the government offering financial assistance programs, but it has also extended tax filings and payment deadlines. This makes it easier for Canadians to do what they have to do to fulfill their tax obligations.
If you are suffering from financial hardship because of the COVID-19 pandemic, make sure to reach out for help. Call us today at 1-844-8454-4219 for budgeting tips and credit counselling services.
Related to COVID-19 Tax Changes:
- Self-Employed Taxes for Small Business Owners
- Do you need help paying bills through Coronavirus?
- COVID-19 Budgeting Tips