February 2021 Canada Revenue Agency
This year, the COVID-19 pandemic may have affected the tax-filing situations of most of the Canadians. It may also affect the way you usually interact with them to file their income tax and benefit returns. Over 30 million returns were filed last season, and over 17 million were electronically filed by tax preparers and tax professionals. The Canada Revenue Agency (CRA) wants to help you make sure you are prepared to file their returns this year.
Signing up for direct deposit
Canadians now have more options to sign up for direct deposit because more financial institutions began to offer CRA direct deposit through their websites as of April 2020. As of November 2020, more than 3 million individuals have enrolled for direct deposit through their financial institution.
Filing for recipients of COVID-19 emergency benefits
The CRA and Service Canada processed more than 27 million Canada Emergency Response Benefit (CERB) applications, totaling more than $81 billion in payments to Canadians. The CRA also processed more than 2 million Canada Emergency Student Benefit (CESB) applications that totaled more than $2 billion in payments.
If you received CERB, CESB, Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), or Canada Recovery Caregiving Benefit (CRCB) payments, you need to include the total amount you received on their return. For any such payments, you will receive a T4A (for benefits issued by the CRA) and/or a T4E (for benefits issued by Service Canada) tax slip in the mail with the information you need to enter on their return. The slips can also be viewed online in My Account and Represent a Client as of February 8, 2021.
The CRA recognizes that receiving these slips might generate questions for Canadians. Those who believe they received a T4A or a RL-1 by mistake or believe there may be discrepancy with the information provided on these slips should contact the CRA.
The CRA wants to add that some provinces or territories may have sent out pandemic related payments that are considered taxable income. These amounts should be included on your tax return.
If you received the CERB or CESB, no tax was withheld when payments were issued. If you received the CRB, CRSB, or CRCB, 10% tax was withheld at source.
Keep in mind that these benefits are taxable and that you may owe no tax, owe tax, or be entitled to a refund when filing their return depending on how much income you earned from all sources, and deductions and credits you are entitled to claim in 2020.
If you have income which is normally exempt from tax, your COVID-19 benefits may also be exempt from tax. If you received CRB, CRSB or CRCB payments in 2020, you can claim a refund of the 10% (5% for Quebec residents) tax that was withheld on these payment by filing a 2020 tax return.