How did you spend New Year’s Eve? Hopefully you rang in the new year with family or friends with excitement – or at least less trepidation – about what 2022 will have in store. Now that January 1 is in the rear-view mirror, as tax professionals, we are beginning to plan for the 2021 tax season.
Here’s some of what you need to know as you start thinking about your personal taxes:
Important Deadlines
- May 2: Individual taxpayer filing and payment deadline for both employer and self-employed taxpayers.
- June 15: Self-employed taxpayer (and their spouse or common-law partner) filing deadline. Since taxes are due on May 2, it is recommended to file by May 2 along with other individual taxpayers
Tax Filing Requirements for Deceased Loved Ones
Things get complicated for those filing tax returns on behalf of deceased loved ones. If the person died between January 1 and October 31, 2021, that person’s return must be filed, and payment made, by May 2, 2022. If they died between November 1 and December 31, 2021, it must be filed within six months of the date of death. If the deceased actively owned a business at the time of their death, these dates change. If they died between January 1 and December 15, 2021, their tax return and any payment are due on June 15, 2021. If they died between December 16 and 31, 2021, the return and payment are due within six months of the date of death.
Tax News & Strategies to Consider
Now that we have the dates established, here are some things you need to know to be ready for filing your returns.
Home Office Deduction & COVID-19 Employment Benefits Clarified
Not long ago, the CRA announced that most 2020 employment benefits were expanded until the end of 2021.
For 2021 (and 2022 for that matter), employees who worked from a home office due to the COVID-19 pandemic can claim up to a maximum flat rate of $500 on their personal income tax return. If an employee receives reimbursement for expenses more than $500, that amount must be listed as income on your income tax return.
COVID-19 Financial Relief
Many people were able to take advantage of federal programs to lessen the impact of the pandemic on their lives. If you received the Canada Recovery Benefit, Canada Recovery Sickness Benefit, or the Canada Recovery Caregiving Benefit in 2021, keep in mind that those payments are taxable. While 10% of these payments were withheld for taxes, that may not be enough to cover what you owe depending on your marginal tax rate.
If you repaid all or a portion of the funds you received under these programs, the options to consider are rather complicated but can be explained by your tax professional. You can expect to receive a T4A slip from the government which will show the total amount of taxable benefits you received in 2021 as well as any repaid amounts. Be sure you compare this slip with your own records for accuracy and have it on hand to share with your tax professional as well.
Update Your MyAccount with CRA
To provide an extra layer of protection for your personal information, the CRA now requires taxpayers to provide their email address to use the MyA system. If you don’t already have an email address on file, you will be prompted to add one. If you don’t add one at that time, your access to MyA will be lost.
We encourage you to add your email address to your profile now to avoid any delays and maintain access to your information. Be aware though, that once you enter your email address you will no longer receive paper correspondence from the CRA.
It looks like you will be able to change this setting later in February, so you continue to receive mailed correspondence if you want.
Expanded Canada Worker Lockdown Benefit
An application site is now available for affected workers in new designated lockdown regions to apply for the expanded Canada Worker Lockdown Benefit (CWLB). If approved, payments will be retroactive to December 19, 2021.
Luxury Tax
While this doesn’t impact your 2021 income tax, it is something you should keep in mind for next year. Starting January 1, 2022, a luxury tax will be levied on the purchase of luxury cars and personal aircraft with a retail sales price of more than CAD 100,000 and boats with a retail sales price of more than CAD 250,000.
The tax will be the lesser of 20% of the value above the sales price threshold or 10% of the full value of the luxury car, boat, or personal aircraft.
Obviously, there are a ton of other things that need to be considered as you gather documents and prepare for your 2021 tax filing, but this should give you a solid start.
Tax Brackets for 2021
As you know, Canada’s federal and provincial income tax brackets are tiered. There are five federal tax brackets, and the 2021 numbers are below:
| Annual Taxable Income | Tax Brackets | Tax Rates | Maximum Taxes for Each Bracket | Maximum Total Tax |
| Up to $49,020 | The first $49,020 | 15% | $7,353 | $7,353 |
| $49,020 – $98,040 | The next $49,020 | 20.5% | $10,049.20 | $17,402.10 |
| $98,040 – $151,978 | The next $53,938 | 26% | $14,023.88 | $31,425.98 |
| $151,978 – $216,511 | The next $64,533 | 29% | $18,714.57 | $50,140.55 |
| More than $216,511 | 33% | N/A | $50,140.55 + 33% of amount in excess of $216,511 |
Of course, each province has its own tax brackets for 2021 as well. Below are the numbers for Quebec:
| Annual Taxable Income | Tax Brackets | Tax Rates | Maximum Taxes for Each Bracket | Maximum Total Tax |
| Up to $45,105 | The first $45,105 | 15% | $6,766 | $6,766 |
| $45,105 – $90,200 | The next $45,095 | 20% | $9,019 | $15,785 |
| $90,200 – $109,755 | The next $19,555 | 24% | $4,693 | $20,478 |
| More than $109,755 | More than $109,755 | 25.75% | N/A | $20,478 + 25.75% of amount in excess of $109,755 |
RSW can Help
It is a good idea to keep an eye on your income each year so you know into which tax bracket you will fall. In some cases, it may make sense to delay some payments or make early expenditures, such as RRSP contributions, if it will keep you in a lower bracket.
Again, this is an area where we can help you plan so you can reduce the amount of tax you are required to pay. We welcome the opportunity to answer your questions and help you get ready for April 30.
Don’t hesitate to reach out to me at hhalabi@rsw.ca or anyone else at the firm. We are here to help.