by RON CLARKE
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First, because April 30 falls on a Saturday, this year the tax filing and payment deadline is Monday, May 2.
A reminder from the 2020 tax season. For those who received a COVID benefit during 2020 and also had taxes payable, qualified for an interest free extension to pay their taxes. That extension ends April 30, 2022, and is coming quickly.
So, what are the changes for 2021 tax preparation? Excited to hear? Don’t hold your breath.
Face masks:
If you own a business that requires face masks to be worn by staff and/or clients and you supply the face masks, you can expense the cost of the masks against your business income on your financial statement.
If you wear a mask in your workplace and supply them at your own expense, if your employer completes a T2200 Conditions of Employment Schedule stating that you must buy your own face masks, you can deduct that cost as an employment expense by reporting it on Schedule T777.
If neither of these two options define your situation and you buy and wear your own face masks, you will need a doctor’s note stating that the wearing of a face mask by you is medically necessary, and then you can claim the cost of the masks as a medical expense on Schedule T1-Medical.
Home office expense:
As it was with 2020 tax preparation, again for 2021 tax prep the government is offering a home office expense claim for those employees who worked from home in 2021 who would not normally have worked from home. This is a claim traditionally available only to those employees who are always required to work from home, COVID or not.
For those people preferring simplicity, CRA is again offering the COVID $2/day “flat rate” method to claim the home office expense for 2021. Acknowledging that 2021 was a full year of COVID protocol, the prior $400 maximum is raised to $500 for 2021.
CRA is also offering the COVID “simplified” method for an employee who wishes to claim more than $500 of home office expense or wants to claim employee expenses beyond normal office type expenses. This would include expenses such as vehicle, travel, meals, and entertainment, and such.
Finally, the “detailed” method is the traditional method to claim home office expenses, and for an employee who normally uses this method, they cannot use one of the two “COVID’ methods.
Before leaving the home office subject, the government has introduced a non-taxable employee benefit of up to $500 for an office equipment purchase that is reimbursed by the employer. Did you personally buy a fancy desk chair, computer desk, or computer, or all three? Your employer can reimburse you up to $500 for your equipment purchases and that $500 will not be considered taxable income to you … and you get to keep the equipment! The equipment can have been purchased as far back as March 15, 2020, but before Dec 31, 2021. For an employee to qualify for this non-taxable benefit, it appears the only criterion is the fact that they had to work from home sometime between those dates. The $500 reimbursement must come to the employee as a one-time payment from the employer.
Vehicles that qualify as a business or employment asset:
The traditional class 10 vehicles that are zero emission vehicles are now moved to class 54, with a 30 per cent capital cost allowance (CCA) rate. At the same time, class 16 vehicles that are zero emission vehicles are now moved to class 55, with a 40 per cent CCA rate. Additionally, class 56 has been created for zero emission automotive equipment that are not road licensed motor vehicles (aircraft, watercraft, rail, heavy equipment) with a 30 per cent CCA rate.
CND — USA 2021 exchange rate:
The annualized rate is 1.2535 and is used when related multiple conversions are necessary. However, in the case of one-off transactions, the exchange rate for that particular month, or even day, should be used. This is the process for all foreign currency. Check CRA or the Bank of Canada for rates.
And yes, there are other tax changes, but these are the exciting ones!
Ron Clarke, owner of JBS Business Services in Trail, provides accounting and tax services.