Tax season is shaping up to be atypical, as was the year 2020. Here are a few things to watch out for if you’re getting ready to fill out your tax returns.
Canada Emergency Benefit
The Canadian government did not withhold income tax at source on the Canada Emergency Benefit (CEP) and the Canada Student Emergency Benefit (CUSB). However, these emergency allowances are taxable, » recalls Sylvain Gilbert, tax partner at Raymond Chabot Grant Thornton. « Many people will have an unpleasant surprise when they file their income tax returns for the year 2020, » emphasizes the expert.
But the size of the surprise should vary depending on the additional income received during the year, depending on whether or not a person has been able to find work, » he explains. « If you didn’t work for the whole year, you’ll end up paying very little tax. But someone who received emergency assistance and then found a job may have to pay more tax, since the tax rate increases with the growth in taxable income, » says Gilbert.
Because of the pandemic, a large number of workers have had to switch to telework and many of the expenses related to this reality can be deducted from income tax, as long as there is no reimbursement from the employer.
Many will have an unpleasant surprise when they file their income tax returns for the year 2020.
Revenu Québec offers two methods to claim a deduction for expenses related to your teleworking job: one at a temporary fixed rate (a deduction of $2 per day for a maximum of 200 days), the other detailed (which takes into account several factors, such as your status as a worker, the size of your office space, or expenses for supplies).
To help you decide which method is the most advantageous for your individual situation, the Agency has made a calculation tool available to Canadians on its Internet site.
Many new investors have turned to the stock market to take advantage of the upturn in recent months. However, it is important to note that half of the capital gain is taxable when it is realized outside a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA).
Gilbert also points out that « you have to distinguish between those whose main activity is investing in the stock market, much like a broker would – at that point, gains on shares, less losses, can be qualified as business income. « But when you’re talking about casual investors, it’s a capital gain, which is only taxable once you’ve sold the shares. For example, if you buy a share at the beginning of the year that is worth $100 and it is now worth $120, as long as you have not sold it, the $20 profit is not taxable. It is when there is a sale transaction, » adds Gilbert.
More and more investors have been tempted by cryptomoney, some of which has soared in value in recent months.
But « they’re not really seen as currency, but rather as a commodity. So every time you make an exchange or a disposition, the gains are taxable, » says accountant Louis Roy, president of Catallaxy, a subsidiary of Raymond Chabot Grant Thornton that specializes in digital assets.
On its site, Revenu Québec reminds that « the use of virtual currency will have tax implications for you if you use it to acquire goods or services; you convert it into monetary currency; you exchange it for another virtual currency; you sell it or donate it.
In this regard, Louis Roy reminds us that many people who own cryptoactives mistakenly believe that they have to pay taxes only on the day they convert them into Canadian currency. « But for every movement from crypto to crypto, for example when you buy ethereum with bitcoin, you have to calculate the loss or gain, » says Roy.
In addition, as with the stock market, it is also important to determine whether the income from cryptomony transactions is business income or a capital gain, » Revenu Québec reminds us on its site.