Updated April 3, 2020
When situations arise that force us to change our working behavior, such as being in self-isolation or quarantine due to COVID-19, this may make us feel uncertain about what it all means in terms of our taxes and if it changes how we handle them. At the time this is being written, there are no specific tax regulations or changes related to being self-isolated or quarantined, with respect to this virus. Keep an eye on our post Is the Tax Deadline Delayed for 2019 Tax Returns? for updates.
Whether you are an employed individual or a self-employed individual, it is understandable to have questions because of this situation, so we are answering a few of the most common ones we are hearing.
What happens if I have to stop working or I am working less?
When you have a decrease in your income, this means that your taxable income is going down. When you do file your taxes next year, your taxable income is what determines what rate of tax is used to determine how much tax we owe. Less employment income will mean less taxable income, and that will be indicated on your T4 next year.
UPDATED: The federal government has introduced some new measures to assist those that have had to stop working or have been laid off.
Canada Emergency Response Benefit (CERB): The newly created Canada Emergency Response Benefit (CERB), will provide a taxable benefit of $2,000 per month, for up to 4 months, to qualifying individuals; workers who lose their income as a result of the COVID-19 pandemic. CERB is a combination of the previously announced Emergency Care Benefit and the Emergency Support Benefit. For more details, see our blog on this new benefit, click HERE.
One-Time Extra Benefit Payments: These one-time extra payments are a part of the GST/HST Tax Credit and the Canada Child Benefit. For more details, see our blog on this new benefit, click HERE.
I am being required to work from home in self-isolation, but I will need supplies, can I write those off?
If your employer has made the decision to ask employees to work from home, your work environment has changed, and in some cases, what you need to do your job effectively has also changed. In most cases, employers are making sure employees are outfitted with all necessary supplies they need for a quarantine period, but there is a possibility that you may have to get yourself some items while you are away from the office. If you are not provided an allowance by your employer, or they are not directly reimbursing you for those expenses, you may be eligible to claim some of your employment expenses.
Your employer will need to provide you with a completed and signed T2200 form, which is Declaration of Conditions of Employment. Once you have that, then you are able to complete the T777, Statement of Employment Expenses, outlining your costs. Make sure you have all of your receipts, and these need to be reasonable expenses. It’s worth noting that these would be applied towards your tax filing for the current tax year (due in April of next year).
What if I get employment insurance benefits (EI), while I am laid off?
EI, is another type of income that is a part of your total taxable income. You will receive a T4E, similar to your T4, that will indicate your EI earnings and all withholding amounts, such as income tax, CPP, and EI contributions.
Are my taxes still due at the same time?
Individual tax returns and payments are due on April 30th, while self-employed returns are due on June 15th. In some extreme cases the CRA might mandate an extension of the deadline; this will be announced by the CRA if/when they make the decision to do so, any given year. Until such time, ensure that you are still completing your taxes by the appropriate deadline for you, and paying any taxes owing by April 30th.
UPDATED: March 18, 2020 the deadlines were adjusted
Due to the COVID-19 Economic Response Plan issued on March 18, 2020 by the federal government, the new deadline for individual tax returns is June 1, 2020. Any income tax amounts that become owing on, or after March 18, 2020, but up to September 2020, are deferred until September 1, 2020.
How will I get my taxes done if no one is working and I use a tax preparer?
The process of completing your income taxes remains the same for the most part. Concerns in health situations are that limiting contact with tax preparers, means you might have to find an alternative to how you used to get your income taxes completed. Many accountant and taxation offices are still completing returns utilizing drop boxes and digital file sharing to get your documents with meetings taking place via phone or through an online meeting application. If you don’t wish to drop off in person anymore, there are several tax solutions available to you right now online.
I think I am missing some forms for my return, but my employer is now away, how do I get them?
Though it is still your employer’s responsibility to get you your employment tax forms, you do have another option. In your CRA My Account, you have access to all of the tax forms that have been completed and remitted on your behalf, including T4s, T4E, T4Ps, T5s…and much more. Some RRSP contributions slips and T3s, may not be available until the end of March, so if you are expecting those, be mindful that they might not be there yet as you don’t want to file an incomplete return.
I am self-employed and have to shut down for a few weeks so I am losing a lot of money, does that change the information I use to file?
For self-employed individuals, you file an additional form called a T2125 that reports your business income and expenses, as well as your vehicle use, capital costs and your business use of home expenses. As a business owner you should be tracking your income and expenses in some type of bookkeeping format. This is very essential so that you can see how your business is doing over a period of time, and it makes tax time so much simpler for you.
You will use the same data that you’ve collected over the year, and input it all into your T2125 form. When we lose money in our businesses, this is reflected on our T2125. When you input your business figures, you might have more expenses than income, which results in a net income loss. This amount is transferred to your T1 as a negative number and is used to calculate your total income. If after all of our income is combed, the total is negative, it is entered as zero as we can’t have negative taxable income. After this you proceed with all of your deductions and credits as you would normally, and complete your income tax return. Since your taxable income is zero, your non-refundable tax credits will not be useful this year; some tax credits like tuition, can be carried-forward to the next year, but you still have to indicate it on this year’s return even if you won’t use it.
UPDATED: The federal government has introduced some new measures to assist those businesses that have employees.
Temporary Wage Subsidy: This is a 3-month subsidy on the payment of source remittances, equal to 10% or total remuneration, for income taxes withheld from employees, to the CRA. This subsidy is taxable income and will require accounting for it in your bookkeeping records. For more information on this subsidy, read our blog on this topic HERE.
Canada Emergency Wage Subsidy: The newly created Canada Emergency Wage Subsidy (CEWS), will provide financial support to businesses that have seen a 30% loss in revenue, as compared to the same time last year, and aims to assist those businesses in retaining their employees, or even re-hiring those they’ve laid off. This subsidy is taxable income and will require accounting for it in your bookkeeping records. For more information on this subsidy, read our blog on this topic HERE.
We’re Here to Support You
If the thought of these changes is overwhelming, we’re here to help. To make tax season as simple as possible, TurboTax has created solutions that work for all situations and preferences, including:
- TurboTax Online, a DIY solution;
- TurboTax Live Assist and Review, with expert assistance, and even
- TurboTax Live Full Service, a TurboTax expert fills out and submits your personal tax return on your behalf.
No matter your income or complexity of your return, you have an expert in your corner with TurboTax.
For more details on income support and other benefits as part of the Federal Government’s Economic Response Plan for COVID-19, click here.
See also our COVID-19: Tax Info Centre, from our TurboTax Support team, answering many FAQs on this topic and more.
Accounting educator, business strategist, and advisor.
Turbo Tax Canada blog editor and writer.
Susan has been an accounting professional for over 20 years, and has been working with businesses and individuals and their taxes for the past 12. Education is a passion for Susan, and when not writing or talking about tax for TurboTax Canada, she can be found speaking at events, teaching at Mohawk College, and working with many businesses and entrepreneurs through her own accounting advisory practice. Susan is known to be approachable but pulls no punches when it comes to the reality of business finance and taxes.