February 22, 2021
This article lists items new for the 2020 tax year that host organizations and/or volunteers should be aware of. It does not attempt to list everything that is new, only those things likely to be of greatest interest and use to host organizations and their volunteers in dealing with clients and their 2020 income tax and benefit returns.
CVITP Organization Identification Number (COIN)
The Canada Revenue Agency (CRA) has introduced a CVITP Organization Identification Number (COIN), a unique and permanent identification number that host organizations obtain when they apply to the CRA to offer CVITP tax clinics. As with the CVITP volunteer identification number, a CVITP host organization’s COIN will not change from year to year. Among other things, this will allow the CRA to keep better track of the number of clients’ returns submitted by a host organization.
Grant Program for Host Organizations
The CRA has introduced a pilot project with $10 million in grant funding over the next three years to support CVITP host organizations. This works out to approximately $3.3 million per year which will be awarded to successful applicants on a first come, first served basis. For our view of this pilot project, see the article entitled “Notice of Assessment: Canada Revenue Agency’s New Grant Program”.
EFILE
With the introduction of the CVITP Organization Identification Number (COIN), volunteers must get the COIN from the host organization they are working with and input the COIN in the UFile software on the settings page for EFILE-NetFile setup (where volunteers also insert their own CRA EFILE number and password). Volunteers who prepare returns for more than one host organization should make sure to change the COIN in the EFILE-NetFile setup page to correspond with the host organization for which they are preparing returns.
EFILE can be used to file client returns for 2017, 2018, 2019 and 2020 via the internet.
COVID-related Income
Many programs of financial assistance were introduced by federal, provincial and territorial governments in 2020 to help individuals cope with the impact of COVID. The following is a list of the five federal financial assistance programs.
CERB (Canada Emergency Response Benefit) – About 8,9 million Canadians received anywhere from $2,000 (one month) to $14,000 (the maximum for the seven months the program was in operation i.e. mid-March to end of September). No income tax was deducted when it was paid out to the client but it is taxable income. A T4A will be issued for benefit payments from CRA and a T4E will be issued for benefit payments from Service Canada. If the client returned CERB payments to the CRA by December 31, 2020, the amount showing on the T slip will reflect the net amount paid to the client. If the client returned CERB payments after December 31, 2020, they may be responsible for paying tax on the gross amount of CERB payments. In this latter case, adjustments will be made when the client’s tax return for 2021 is prepared.
CRB (Canada Recovery Benefit) – When the CERB was terminated in September 2020, some people were able to shift to Employment Insurance (EI). However, for those ineligible to receive EI after the CERB program was terminated, this replaced the CERB and paid out $1,000 every two weeks to eligible individuals. This is taxable income. Unlike the CERB, 10% was withheld to cover income tax the client might have to pay for 2020. However, the 10% might not cover all of the taxes owed on this income. A T4A will be issued for benefit payments from CRA and a T4E will be issued for benefit payments from Service Canada.
Note: For every dollar of net income in excess of $38,000 in 2020, the client will have to repay 50 cents. Net income includes any CERB, CRSB and CRCB payments the client may have received, but it does not include the CRB and CESB. (Net income is a specific amount calculated on the tax return and is equal to the client’s total income, less deductions for various contributions, payments and expenses, such as those related to Registered pension plan contributions, RRSP contributions, union or professional dues, child-care expenses, alimony and maintenance, and moving expenses.)
CESB (Canada Emergency Student Benefit) – The CESB provided financial support to post-secondary students, and recent post-secondary and high school graduates who were unable to find work due to COVID-19. Applicants received $1,250 for a 4-week period for a maximum of 16 weeks, between May 10 and August 29, 2020. Applicants could also get an extra $750 (total benefit amount of $2,000) for each 4-week period, if they had a disability or dependants. Like the CERB, no income tax was deducted when it was paid out to the client but it is taxable income. A T4A will be issued for benefit payments from CRA and a T4E will be issued for benefit payments from Service Canada.
CRSB (Canada Recovery Sickness Benefit) – The CRSB provides $500 per week for up to a maximum of two weeks, for workers who are unable to work for at least 50% of the week because they contracted COVID-19, are self-isolated for reasons related to COVID-19, or have underlying conditions, are undergoing treatments or have contracted other sicknesses that, in the opinion of a medical practitioner, nurse practitioner, person in authority, government or public health authority, would make them more susceptible to COVID. This is taxable income; 10% was withheld to cover income tax the client might have to pay for 2020. However, the 10% might not cover all of the taxes owed on this income. A T4A will be issued for benefit payments from CRA and a T4E will be issued for benefit payments from Service Canada.
CRCB (Canada Recovery Caregiving Benefit) – The CRCB provides $500 per week for up to 26 weeks per household for workers who are unable to work for at least 50% of the week because they must care for a child under the age of 12 or family member because schools, day-cares or care facilities are closed due to COVID, or because the child or family member is sick and/or required to quarantine or is at high risk of serious health implications because of COVID. This is taxable income; 10% was withheld to cover income tax the client might have to pay for 2020. However, the 10% might not cover all of the taxes owed on this income. A T4A will be issued for benefit payments from CRA and a T4E will be issued for benefit payments from Service Canada.
Note: If the client has to pay tax, they can delay payment until April 2022 with no penalty. But they must nevertheless file by April 30, 2021.
Deductions
Home Office Expenses for Employees (Temporary Flat Rate Method) – Employed clients who worked from home in 2020 due to the COVID pandemic can use the temporary flat rate method to claim a deduction of $2 for each day they worked at home up to a maximum of $400. To claim the deduction, they must have worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020, were not reimbursed by their employer for home office expenses, and are only claiming home office expenses and not any other employment expenses.
Refundable Tax Credits
Canada Training Credit (CTC) – Clients can claim the CTC for eligible tuition and other fees paid for courses they took in 2020 if they were a resident in Canada throughout the year, at least 26 years old and less than 66 years old at the end of the year, and their 2019 notice of assessment or reassessment shows a CTC limit for 2020. The client must have paid their tuition or fees to an eligible educational institution in Canada or to certain institutions for an occupational, trade or professional examination.
The amount the client can claim is up to, but not exceeding, the lesser of their CTC limit for 2020, and 50% of the eligible tuition and other fees paid to an educational institution in Canada for courses they took in 2020 (or fees they paid for an occupational, trade or professional examination taken in 2020).
Overpayment of Benefits
Because the deadline for submitting returns to maintain eligibility for some federal, provincial and territorial benefits was pushed back to the beginning of September, the CRA may have advanced some of these benefits starting July 1 using information from the client’s 2018 return. However, if the CRA had not received the client’s 2019 return by the beginning of September, the client’s benefits were discontinued in October.
Furthermore, the client may have subsequently received correspondence from the CRA indicating that the client now had to reimburse the CRA for the benefits they had been advanced during the July to September period. (As one of our clients received such correspondence from the CRA, we called the CRA to get clarification and were given a very ambiguous answer along the lines of “yes, we are sending out these letters demanding repayment but your client can ignore the one they’ve received from us”.) This situation might be further complicated by the fact the client filed late their return for 2019, albeit late, and their return had still not been processed by the CRA in September.
It is unclear what the implications of this are for the 2020 tax return. However, clients who received correspondence from the CRA asking them to repay monies advanced to them may be asking for guidance on this. Host organizations should make note of such cases during the client intake registration process and, where possible, separate the issue from the 2020 return preparation process. It will be up to the host organization to decide whether to ask the CVITP volunteer who is preparing the client’s 2020 return or another party to deal with it separately.
In conclusion, further information on how to deal with many of these issues can be found on the What’s New page of the CRA’s CVITP Volunteer website. It is particularly useful for advice on how volunteers should handle the various issues in UFile.