The 2021 tax filing season is now here and you should be getting ready to file your 2020 personal taxes. This year will have unique COVID issues and has seen some changes that should be considered.
Generally, your personal tax filings for the 2020 year are due by April 30th, 2021. This is also the due date for any tax payments to be made. However, if you or your spouse carried on a business in 2020 as a sole proprietor, your 2020 return may be filed on or before June 15th, 2021. However, the deadline for payments do not change (payments are still due by April 30th, 2020).
Late Interest and Penalties
If you owe a balance for your 2020 tax filings, CRA will charge interest starting May 1, 2021 on any unpaid amounts owing for 2020 and compound this daily. The rate of interest is determined every three months – currently at 6.0%.
In addition, if you file your returns late – there are late filing penalties. The late filing penalty is currently 5% of your 2020 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months. Note if you are a repeat late filer, the penalties are doubled and you may also be subject to repeated failure to report income penalties. So even if you don’t have the funds to pay off the amount you owe, you will save on late filing penalties if you pay on time.
Note taxpayers who received COVID-19 related income benefits may not be required to pay any outstanding income tax owed for the 2020 tax year until April 30, 2022. To qualify, taxpayers must have had $75,000 or less of total taxable income in 2020 and have received some form of COID-19 income support. Note late filing penalties still apply – so file before your filing due date.
Benefits to Filing
There are benefits to filing a tax return for 2020. You should file a tax return for 2020 if you:
- Wish to claim a refund for the year
- Want to claim benefits such as the working income benefit
- Want to receive the Canada Child Benefit, GST/HST credit or Guaranteed Income Supplement (if you qualify) for the next year
- You incurred a non-capital loss that you wish to roll forward to future years
- You want to transfer or carry forward tuition fees
- You want to report income that will increase RRSP, RPP or CPP contribution room
- You want to carry forward unused investment tax credits
- You want access to the carbon tax credit (in qualifying provinces)
Who Must File
There are also instances in which you must file a tax return. These include:
- You have to pay tax for the year
- The CRA sent you a request to file
- You are electing to split your pension income
- You disposed of (sold) capital property, including your principal residence
- You have to repay all or part of your old age security or employment insurance benefits
- You have not repaid portions of your RRSP used for the home buyers plan or lifelong learning plan
- You have to contribute to the Canada Pension Plan
- You are paying employment insurance premiums on self-employment
The tax filing process also provides an occasion to strategize for tax planning opportunities in 2021. Shajani LLP Chartered Professional Accountants have a team of Calgary Accountants, Edmonton Accountants and Red Deer Accountants ready to assist you in your personal tax filings and tax planning strategy.
This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. © 2021 Shajani LLP.
Shajani LLP is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning services.