While the government may have extended the 2019 personal tax filing general deadline from April 30 to June 1, 2020 as result of the COVID-19 pandemic, Canadians expecting a tax refund may wish to file as soon as possible to get any much-needed cash owed to them by the Canada Revenue Agency (CRA).
EXPECTING A REFUND?
A tax refund typically arises when the amount of tax owing on your return is less than the amount of tax withheld from your income during the year. Employment income is the most common type of income from which tax is deducted at source and thus employees are most often the ones who get significant tax refunds each year.
The amount of tax withheld by your employer is generally calculated by taking into account various credits to which you are entitled but without taking into account various deductions often claimed on your tax return. If you made an RRSP contribution (other than via payroll deduction), incurred deductible child-care expenses, made spousal support payments, or paid interest on money borrowed for investment or business purposes, you could find yourself with a refund this tax season.
The CRA is continuing to process returns throughout the COVID-19 pandemic and is encouraging Canadians to file their returns electronically and “as early as possible before June 1, 2020, to make sure your benefits and credits are not interrupted.” This is particularly important if you are receiving income-tested benefits, such as the GST/HST Credit or the Canada Child Benefit. The payments for the 2020-21 program year are based on the prior year’s return and are set to begin in July 2020.
As of March 9, 2020, the CRA had received nearly four million personal tax returns, with 92.5 per cent of them filed electronically. Nearly 90 per cent of the 3.4 million processed returns to date had either no balance owing or a refund, with the average refund being $1,820.
If you are not yet registered for direct deposit, the CRA is recommending you to do so using the My Account self-service portal. Direct deposit is the “fastest and most reliable way” to get government benefit and credit payments. Of the nearly $4.7 billion in refunds paid to date, 85 per cent of them have been paid via direct deposit.
ELECTRONIC FILING
With the outbreak of COVID-19, taxpayers are encouraged to file their 2019 tax returns electronically. Both individuals and registered tax preparers can access copies of most 2019 tax slips (T4s, T5s, RRSP contribution slips, etc.) remotely using the CRA’s Auto-fill my return feature to download tax information into professional tax preparation software. A full list of CRA-certified software can be found online. Some of the software is completely free, while some paid tax software provides free offerings based on individual tax situations or income levels.
TAX PREPARERS
If you generally get your return prepared by a third party, the CRA announced measures to reduce the necessity for taxpayers and tax preparers to meet in person during this difficult time and to reduce administrative burden. The CRA is now recognizing electronic signatures as having met the signature requirements of the Income Tax Act, as a “temporary administrative measure.” This administrative relief will apply to the authorization on CRA Form T183, which is the form that is usually signed in-person by millions of Canadians every year to authorize tax preparers to EFILE taxes.
BALANCE OWING
If you owe money on your 2019 tax return, you have until Sept. 1, 2020 to pay, which is four months later than the usual April 30 deadline. This means you will not be assessed any penalties or interest if your balance due is paid by Sept. 1, 2020.
TAX INSTALMENTS
Finally, if you pay tax by instalments, you now have until Sept. 1, 2020 to pay your June 2020 quarterly personal tax instalment. The government has confirmed that neither interest nor penalties will accumulate from March 18, 2020 to Sept. 1.