Episode 31: Getting Ready for Tax Season - 2021 Edition
Updated: Feb 6, 2022
Welcome back to another episode of Chat with Brandy, a blog where we talk personal & business finance, taxes, and how to make money while doing what you love! I’m your host, bookkeeper and tax preparer Brandy Miron, and this is episode 31. Unfortunately, due to technical difficulties there is no video to accompany this 'episode'.
It’s that time of the year again – tax season is coming! This video and related blog post is an update to episode 30, which gives lots of good general advice on tax checklists and deductions. This video will concentrate on the updates for this year as we file our 2021 tax returns.
The first step towards a successful tax season is to prepare early by organizing your documentation well in advance of the tax deadlines. The last day to file as an individual is May 2nd, 2022, and that is also the deadline to pay any tax owing.
If there is a chance you’ll owe taxes, you should file several weeks in advance of the deadline so the Canada Revenue Agency (CRA) can assess your return before payment is due. If you file late and end up owing taxes, you’ll pay interest and penalties on your outstanding tax balance until you submit your payment to the CRA.
If you have self-employment or rental income to report, your return isn’t technically due until June 15, 2022, but any taxes owing are still due May 2nd, so I typically recommend sticking with the earlier deadline.
CRA is currently closed for e-filing of any tax year, and will likely re-open around February 25th– this will be the earliest you can file your 2021 tax return, and I would only recommend filing that early if you are 200% sure you have all of your T-slips. T-slips, such as T4’s, T5’s, T3’s, etc, are not due to be filed your payors until February 28th, so it’s often a good idea to hold off and make sure you have everything.
Other slips that may come a little later are RRSP contribution slips (because the contribution deadline is March 1), and T5018 slips if you have done any construction contracting type of work are not due until 6 month’s after the payers year-end, so that could be as late as June 30 – if you do construction contract work, it’s a good practice to track your own income so you do not have to wait on the slip.
In Episode 18, I listed all the Alberta deductions, so check that out first – here are the updates!
RATES & LIMITS
The percentage of tax you pay depends on how much your taxable income is – that is ALL of your income minus deductions and credits. When you pay tax, you are paying both federal and provincial tax. Each of the provinces has a different progressive tax bracket structure, and so does the federal government.
The tax brackets increase a little each year, based on inflation – this means that you can make more money and stay in a lower tax bracket. Here are the 2021 numbers:
Corporations claiming the small business tax deduction (Canadian-controlled private corporations with active business income under $500,000) will still pay a federal tax rate of 9%. The Alberta corporate tax rate for small businesses remains at 2% for 2021.
Just like last year, any CERB/CRB or Canada Workers Lockdown Benefit income you have received in the year will be issued on slips and will be taxable income.
Credits & Benefits
1. Last year, Albertans enjoyed the Climate Action Incentive refund of $490 (plus more for dependants and children) as part of their tax refunds, but this year it will be treated more like the GST credit is and will be paid out quarterly. The quarterly payments will start in July 2022 as a double payment, and then the 3rd and 4th quarters will be paid in October and January 2023.
2. The Disability Tax Credit is now easier to apply for – instead of using the old long forms, medical practitioners now have access to an online app that can be used to apply. See more about DTC in Episode 28. There have also been new fee restrictions put in place for DTC applications.
3. Indexations have been updated for OAS clawbacks (approx. $80K+ income will grind your OAS by about 15%), and the Canada Workers Benefit.
4. The simplified work from home credit has been extended until 2022. If you worked from home in 2021 due to covid for at least 4 consecutive weeks at least 50% of the time, you will be able to write off $2/day as an employment expense, up to $500 (up from $400 in 2020).
5. The Educator School Supply Tax Credit is being enhanced to include more eligible expenses such as electronic devices (webcams, microphones, etc) and software to help with remote learning. The limit of supplies you can claim is still $1,000.
HOW CAN I BE PREPARED FOR THE TAX SEASON?
Lucky for you, I have prepared TAX CHECKLISTS for almost every personal tax situation possible!
Start with the Personal Tax Checklist
Then, if applicable:
Rental Property Tax Checklist Employment Expenses Checklist
Foreign Income Reporting Checklist
And as always, if you have any questions at all about what is required, reach out to me and I’d be happy to chat!