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Canadian
Tax Planner
January 2021
Personal Tax Issues Due to COVID-19
With COVID-19 impacting nearly all aspects of our lives in 2020, it is unsurprising that a number of tax issues
have arisen as a result. Many of us were required or chose to work from home. Many incurred costs related
to this work. Others may have benefited from the Federal support programs due to loss of employment or
business. Regardless, many have novel tax issues that should be considered and planned for prior to filing
our 2020 personal tax returns.
In this issue of Canadian Tax Planner, we will focus on COVID-19 tax issues as they relate to individuals that
were employed for some or all of 2020 and individuals who received some type of support from the Federal
Government.
Specifically, we will discuss:
• PART 1: Employees Working from Home – Tax Deductions
• PART 2: Employment Support
• PART 3: Other COVID-19 Benefits and Support
WARNING: This information is for educational purposes only. As it is impossible to include all situations, circumstances and
exceptions in a newsletter such as this, a further review should be done by a qualified professional. No individual or organization
involved in either the preparation or distribution of this letter accepts any contractual, tortuous, or any other form of liability for
its contents or for any consequences arising from its use. Photocopying, replication or any other reproduction of the information
contained within the newsletter, for any reason, other than a single page for reference only is strictly prohibited. Copyrighted ©
Video Tax News Inc. 2021. Date of Issue – January 2021. This periodical is published six times per year in January, March, May, July,
September and November.PART 1: Employees Working from Home – Tax Deductions
With most of the country under various levels Temporary flat rate (TFR) method
of lockdown for different periods in 2020, many
employees found themselves working on the kitchen This method will allow eligible employees to claim
table, on a sofa, in their bedroom, or, perhaps for a deduction of $2/day they worked from home, to
the lucky ones, in a segregated home office. Many a maximum of $400. Days worked full-time or part-
incurred additional costs for utilities (due to being time, as well as days worked on the weekend, all
home all day), internet, and other such items. count. However, days off, vacation days, sick leave
Others may have not necessarily incurred additional days or other leaves or absences do not count.
monetary costs, however, employment activities As compared to the historical rules, this is a much
encroached on personal space. As a result, many simpler claim requiring no employer certification
are asking whether there any compensatory tax nor invoices or receipts to support the expenses
deductions that can be made. at home.
Historically, the rules to claim expenses against To claim the TFR, the employee must meet all of the
employment income for those working from home conditions below:
have been very restrictive. For example, if the
employee simply chose (as opposed to being • the employee worked from home due to the
required) to work from home, no deduction would COVID-19 pandemic;
be allowed. Also, if an employee was eligible, the
types of deductible expenses were quite limited. As • the employee worked more than 50% of the
another example, CRA’s administrative policy only time from home for a period of at least four
allowed deducting home internet access fees in consecutive weeks in 2020;
very limited situations. • the employee is not claiming any other
In December 2020, CRA released significant employment expenses (such as motor vehicle
administrative relieving provisions for those expenses or a deduction for tradespersons
employees who worked from home for at least a tools); and
portion of 2020. CRA has said that this will only • the employer did not reimburse all of the
be available for the 2020 year. employee’s home office expenses. If the
Two new options have been made available for employer reimbursed some of the home office
these employees who wish to claim a deduction on expenses, the employee can still make a claim.
their personal tax return: To compute the number of working days for a
• Temporary Flat Rate Method – for employees particular period, see the calculator at https://
who claim a flat amount ($2/day to a maximum www.timeanddate.com/date/workdays.html. This
of $400). No employer certification is required. website also lets users customize the particular
days of the week to select for the period (e.g. if an
• Detailed Method – for employees who claim individual only works Mondays and Tuesday, users
actual expenses related to working from home, can determine how many of these days are in the
supported by receipts. Employer certification period). This will be particularly important as many
is required. people who were not working exclusively from
home since mid-March will not reach the 200 work
For those employees who have employment days required for a maximum claim. For example,
expenses other than those related to working from if an individual works Monday through Friday and
home, the rules are generally unchanged.
WARNING: This information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a
further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this letter accepts any contractual,
tortuous, or any other form of liability for its contents or for any consequences arising from its use. Photocopying, replication or any other reproduction of the information
contained within the newsletter, for any reason, other than a single page for reference only is strictly prohibited. Copyrighted © Video Tax News Inc. 2021. Date of Issue –
January 2021. This periodical is published six times per year in January, March, May, July, September and November.
2started working at home on March 16, they will continuous basis for meeting clients,
have needed to work nearly every day (other than customers, or other people;
public holidays and weekends) until December 31
(depending on the province/territory) to make the • the employee has a completed and signed
maximum claim of $400. Form T2200S or Form T2200 from their
employer; and
Detailed method (DM)
• the expenses were used directly in the work
As an alternative to the TFR method, eligible during the period.
employees can choose to use the detailed method
to claim amounts paid for the period that the Eligible expenses
employee worked from home. This method requires There are three broad categories of expenses
the individual to determine the portion of home related to working from home that can be deducted:
expenses that reasonably relates to the work space work space in home, office supplies, and other
used for employment purposes. For 2020, if an expenses. Commission sales employees meeting
employee has expenses that only relate to working specific requirements have broader access to
from home, the simplified employer certification deductible expenses than other employees.
T2200S can be used. This is expected to reduce
the administrative burden which has been of Work space in home expenses
considerable concern to many employers.
All employees can claim a portion of electricity,
For employees with expenses beyond those related heat, water, maintenance and repair costs, the
to working from home, the more extensive T2200 utilities portion of condo fees, and rent related to the
is required. use of their work space in home. Commissioned
employees can also claim a similar portion of home
Whether an individual has other employment insurance and property taxes.
expenses or not (and thus has the T2200 or
T2200S), the qualification requirements to claim Reasonable maintenance and repair costs relating
expenses related to the home, or other eligible directly to the work space can be deducted (e.g.
expenses, are the same. light bulbs, or repairing walls of the work space).
A portion of amounts relating to the entire home
Eligibility is also deductible (e.g. minor repairs to the home
To claim expenses related to working from home furnace). No portion of amounts related entirely
using the detailed method, all of the conditions to the non-work space portion of the house (e.g.
below must be met: painting a child’s bedroom) can be deducted.
• the employee worked from home due to the Employees will need to consider both the space
COVID-19 pandemic or the employer required and the time that the work space is used for
them to work from home; employment. A reasonable portion of home costs,
based on the portion of the total finished home
• the employee was required to pay for expenses space (including hallways, bathrooms, etc.) used
related to the work space in their home; for work can be deducted.
• the employee worked more than 50% of the Consistent with CRA’s historical guidance, a
time from home for a period of at least four designated work space used exclusively for
consecutive weeks in 2020 or the work space employment is not impacted by the absolute number
was used exclusively to earn employment of hours that the space is used in the period.
income and was used on a regular and
WARNING: This information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a
further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this letter accepts any contractual,
tortuous, or any other form of liability for its contents or for any consequences arising from its use. Photocopying, replication or any other reproduction of the information
contained within the newsletter, for any reason, other than a single page for reference only is strictly prohibited. Copyrighted © Video Tax News Inc. 2021. Date of Issue –
January 2021. This periodical is published six times per year in January, March, May, July, September and November.
3However, where the work space is not exclusively Other expenses (e.g. cell phone and land line)
used for employment purposes, the calculation
must be reduced for the non-employment use of CRA has also reiterated that the basic service plan
the space. For example, where an employee uses of a cell phone can be claimed if the cost of the
their dining room table (dining room constitutes plan is reasonable, the cost has been reasonably
12% of total finished area of home) partially for apportioned between employment and personal
employment (40 hours out of the total 168 hours use, the employee can show the cost of cell minutes
per week), the employment use would be 2.8% or data, and that they were consumed directly
of the home (12% x 23.8% (40 hours/168 total while performing employment duties. Likewise,
hours) = 2.8%) for each week. Also, where the the cost of long-distance telephone calls made for
work space was only used for a portion of the year, work is deductible. However, monthly basic rent
even if there were multiple periods of working from for a landline, cell phone connection and license
home, only expenses related to the days or weeks fees, phone cases, phone protection plans, and the
working from home can be claimed. purchase of a cell phone are not deductible.
When these allocations are fully incorporated, Non-deductible costs
the TFR method may generate a comparable or In addition to specific items noted above, capital
superior deduction to that available under the expenditures, such as mortgage interest, principal
detailed method, especially where the work space mortgage payments, furniture and equipment,
had mixed employment and non-employment use. computers and their accessories, other electronics,
Internet fees and CCA are not deductible against employment
income.
CRA has also recently stated that a reasonable
employment allocation of home internet access Overall
fees is deductible. Broadly, the TFR method is a simpler option. The
CRA’s new guidance treats home internet access detailed method is more complex as it requires
fees as part of the work space in home expense, detailed support and employer certification. The
implying that their deductibility varies with both the detailed method may be better for employees that
work space square footage and time use. CRA have significant work space and other employment
has verbally stated that this decision was made for expenses, and a large portion of their home is used
simplicity, and that another reasonable basis may exclusively for employment purposes. There are
be used. usually additional accounting fees associated with
the detailed method claim. Many advisors expect
Office supplies that the detailed method claims will attract more
attention from CRA that the TFR method.
CRA has compiled a list (see https://tinyurl.com/
y8l6nytw) of common office supplies, noting which For assistance in selecting the best claim consider
ones are deductible (such as toner and printer using CRA’s calculator (https://tinyurl.com/
paper) and those that are not deductible (including y8vdfwd8).
many capital assets such as USB keys, headsets
and webcams) for employees. Only commission Employee choice to work from home
sales employees can claim the lease of a cell phone, CRA has also stated that, if an employer provided
computer, laptop, tablet, fax machine, etc. that the employee with the choice to work at home
reasonably relate to earning commission income. because of the COVID-19 pandemic, then they
WARNING: This information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a
further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this letter accepts any contractual,
tortuous, or any other form of liability for its contents or for any consequences arising from its use. Photocopying, replication or any other reproduction of the information
contained within the newsletter, for any reason, other than a single page for reference only is strictly prohibited. Copyrighted © Video Tax News Inc. 2021. Date of Issue –
January 2021. This periodical is published six times per year in January, March, May, July, September and November.
4will consider the employee to have worked from home due to COVID-19, permitting the employee’s claim. The
other eligibility conditions must still be met. Employment expenses can only be claimed if the employee is
clearly required (not “permitted” or even “strongly encouraged”) to incur them, however, CRA is clearly making
an exception for employees who worked from home in 2020 due to COVID-19.
Comparing the options – some additional questions
Temporary Flat Rate Method Detailed Method
Can more than one person If multiple people working from the Where multiple employees are working
in a single home claim an same home each meet the eligibility from the same home and share a work
amount? criteria, each can make a full TFR space, they should calculate their
claim. That is, one claim will not erode respective employment use of the
another claim. This is particularly useful space. This will reduce the value for the
if more than one person, such as a claim for each individual.
couple and their adult children are all
working from home.
What if the employer As long as the employer did not Any reimbursement will reduce the
reimbursed the employee reimburse all of the employee’s costs amount of expenses that are deductible.
for some of the costs? related to working from home, and the
employee meets all the other eligibility
criteria, they can get the full $2/day
claim.
What if an employee This method is available only to those This would have no impact on the
always worked from home individuals who worked from home employee claiming a deduction under
and they simply continued due to COVID-19. Therefore, if the this method.
to work from home in individual would have worked from
2020? home regardless, they would not be
eligible for the TFR method.
How does the four-week Once the individual worked from home more than 50% of the time for the one-
test work? month (or four-week) period, they will satisfy this condition. If after this, they work
from home only sporadically, or less than 50% of the time, they can continue to
claim the deduction in respect of the additional days. That means for the TFR,
they get $2/day for each day they worked from home, and for the detailed method
they can claim the home’s expenses that relate to the work space for the period
the employee works from home. Under the detailed method, if the four-week test
was not met, the taxpayer could also qualify if the work space was used exclusively
to earn employment income on a regular and continuous basis for meeting clients,
customers, or other people.
How will CRA enforce CRA has not explicitly stated how they will verify eligibility of this claim, other than
these claims? noting that they have access to third-party information and may use that in their
compliance activities.
WARNING: This information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a
further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this letter accepts any contractual,
tortuous, or any other form of liability for its contents or for any consequences arising from its use. Photocopying, replication or any other reproduction of the information
contained within the newsletter, for any reason, other than a single page for reference only is strictly prohibited. Copyrighted © Video Tax News Inc. 2021. Date of Issue –
January 2021. This periodical is published six times per year in January, March, May, July, September and November.
5PART 2: Employment Support
Employment home office expense equipment or other office equipment was picked
reimbursements up so that the employee could work from home.
Generally, a reimbursement for the personal Corporate vehicles – standby charge
purchase of equipment used for working remotely
is a taxable benefit. However, in the spring of 2020, When an employer makes a corporate automobile
CRA stated that, in the context of the COVID-19 available for use to the employee, a taxable benefit
pandemic, the acquisition of computer equipment is conferred on them. The benefit consists of an
may be primarily for the employer’s benefit and as operating expense benefit which captures the
such, a reimbursement supported by actual invoices usage benefit, and a standby charge which covers
or receipts of no more than $500, would be a non- the cost associated with making the automobile
taxable benefit to the employee. More recently, available for the individual’s personal use.
CRA extended this position to similarly apply to The standby charge is 2%/month of the original
other home office equipment (for example, a desk, cost, or if the vehicle is leased, 2/3rds of the lease
office chair, etc.) reimbursed by the employer. The payment. However, a reduced formula is used if
$500 limit applies to each employee. If more than the vehicle is driven primarily for business purposes
$500 is reimbursed, the amount in excess of $500 and the total personal kilometres driven per year
is taxable. is less than 20,004. This charge is reduced by
This assumes that the assets are owned and multiplying the total kilometers driven for personal
retained by the employee. If they are owned by the use (if under 20,004) divided by 20,004 (if the
employer and used at the employee’s home only vehicle was available for the whole year).
for the period they must work from home, there As COVID-19 related restrictions and business
would be no taxable benefit. declines may have decreased the amount of
A non-accountable allowance in respect of the business travel required, some individuals may
work space expenses would be taxable. find themselves using the vehicle less than 50%
for business, thereby dramatically increasing
Commuting costs their standby charge. For example, consider an
employee that typically drives a corporate vehicle
Where an employee continues working at their 10,000km for business use and 5,000km for
regular place of employment (RPE) during the personal use annually. In 2020, the personal use
COVID-19 pandemic, CRA will not consider stayed the same, but the busines use dropped to
an employee to receive a taxable benefit where 2,000km. Even though there had been no change
their employer pays for, reimburses, or provides in personal use, the employee would be subject
a reasonable allowance for additional commuting to a full standby charge whereas a 75% reduction
costs incurred by the employee. would have been available in the prior year.
Where an employee is working from home because On December 21, 2020, the government proposed
the RPE is closed, CRA would not consider the a change such that the 2020 and 2021 standby
employee to receive a taxable benefit where the charge could be based on the 2019 usage of the
employer pays for, reimburses, or provides a automobile. This relief would only be available to
reasonable allowance for commuting costs incurred employees who were provided a vehicle by the
to allow the employee to travel to their RPE. This same employer in 2019.
could be the case, for example, where computer
WARNING: This information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a
further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this letter accepts any contractual,
tortuous, or any other form of liability for its contents or for any consequences arising from its use. Photocopying, replication or any other reproduction of the information
contained within the newsletter, for any reason, other than a single page for reference only is strictly prohibited. Copyrighted © Video Tax News Inc. 2021. Date of Issue –
January 2021. This periodical is published six times per year in January, March, May, July, September and November.
6Corporate vehicles – motor vehicle home at of the vehicle other than to travel between work
night policy and home, and the vehicle must be specifically
designed or customized for use in the worker’s
CRA also stated that minimizing the employee’s employment and be essential in performing the
risk of exposure to COVID-19 during the pandemic employment duties.
(e.g. by facilitating social distancing) is a valid
business reason for requiring an employee to take However, if the vehicle is an automobile, a standby
a vehicle home each night. Provided all the other charge and operating benefit would be assessed,
requirements for the “motor vehicle home at night” which would result in significantly more tax. If
policy are met, the employer can use the reduced the vehicle is not an automobile, but another
kilometric rate (28¢/km in 2020) in computing the requirement for the policy is not met, a reasonable
taxable benefit. In other words, if an employee estimate of the fair market value of the employee’s
is required to take the corporate vehicle home personal use of the vehicle (including the GST/
nightly, the employee would be subject to a benefit HST and PST) must be calculated. CRA indicated
of 28¢/km for every kilometer driven between home that they will accept the legislated deductible per
and work. There is a benefit because the corporate kilometer rate for employee allowances (59¢/km
vehicle assisted with the personal cost of getting for the first 5,000 km driven, 53¢/km thereafter for
between work and home, even if the employer 2020) as the fair market value.
required the vehicle to be brought home.
Parking
One example of a criterion that must be met for
this policy to take effect is that the vehicle not be Where the RPE is closed due to COVID-19, CRA
an “automobile”. Therefore, a van, pick-up truck, or will not consider an employer-provided parking
similar vehicle that is used 90% or more in the year spot at the place of employment to be taxable.
acquired or leased to transport goods, equipment Records and support must be retained.
or passengers in the course of business, would
qualify. In addition, there can be no personal use
PART 3: Other COVID-19 Support and Benefits
Individuals may have also received support from a tax withholdings have been taken. This means
wide variety of entities, however, the most significant that many individuals will have some tax owing. To
ones have come from the Federal Government. As estimate the tax bill, many calculators are available
such, this section will focus on the taxability and which consider COVID-19 support, other income
related issues on Federal programs. and the province of residence. On such example is
www.taxtips.ca/calculators/basic/basic-tax-
Canada Emergency Response Benefit (CERB) calculator.htm. While many benefits require repayment
Up to $14,000 in CERB payments ($500/week) when the total earnings for the year exceed certain
could have been received in 2020 if the individual thresholds, this is not the case for CERB.
was eligible for the full 28 weeks. These amounts At the time of publication, CRA had commenced
will be reported on a T4A. In addition, just like a program to review eligibility for claims under at
employment insurance (EI) benefits, these amounts least CERB. If it is determined that the applicant
are taxable. However, unlike EI benefits, no income was not actually eligible, full repayment would be
WARNING: This information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a
further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this letter accepts any contractual,
tortuous, or any other form of liability for its contents or for any consequences arising from its use. Photocopying, replication or any other reproduction of the information
contained within the newsletter, for any reason, other than a single page for reference only is strictly prohibited. Copyrighted © Video Tax News Inc. 2021. Date of Issue –
January 2021. This periodical is published six times per year in January, March, May, July, September and November.
7required. One of the common early areas of focus that individuals will be eligible if they have earned
by CRA was examining situations in which the at least that much in the 12-month period prior to
$5,000 of previous earnings criterion may not have their first application. Consider an individual that
been met. earned $3,000 in December 2020 and $3,000 in
January 2021. If they lost the income stream in
Employment insurance (EI) February of 2021, they would be eligible because
As of September 27, 2020, temporary changes they would have earned $6,000 in the previous
to the EI system have been made which provide 12 months. However, CRA may only be aware of
a $500 minimum weekly payment for regular the $3,000 earned in 2020 since the 2021 return
benefits. Payments are taxable with 10% withheld would not have been filed by the application date.
at source. Amounts will be reported on a T4E. This means that CRA may follow-up and ask for
support that the remaining required income had
Where income from all sources exceeds $67,750 been received by application.
(for 2020) the individual will be required to repay
30% of the lesser of: Another area of concern is in respect of individuals
becoming ineligible for CRB if they have quit after
• net income in excess of $67,750 (for 2020); or September 27, 2020, or refused a reasonable
opportunity to work. Quitting without reasonable
• the total regular benefits, including regular cause results in complete ineligibility for the
fishing benefits, paid in the taxation year. program, while refusing a reasonable opportunity
The required repayments are calculated on the to work results in a 10-weeks of lost access to
personal income tax return for the year. CRB. If found to be ineligible, benefits received
will have to be paid back.
Canada Recovery Benefit (CRB), Canada
Recovery Sickness Benefit (CRSB), Canada Canada Emergency Student Benefit (CESB)
Recovery Caregiver Benefit (CRCB) A benefit of $1,250 was available per four-week
Similar to CERB, each of these three benefits pay period for post-secondary students, and recent
out $500/week. They are taxable and reported post-secondary and high school graduates. A $750
on a T4A, however, unlike CERB, 10% has been potential top-up was available if the applicant was
withheld so less surprises at income tax filing time disabled, had a child under 12, or had a disabled
will occur. Another difference is that there is a dependent. These payments are taxable and will
$0.50 repayment requirement for CRB for every be reported on T4A slips. The benefit will not be
dollar received in excess of $38,000 in net income required to be repaid if annual earnings exceed
per calendar year. Net income, for these purposes, certain thresholds. However, like CERB, earnings
includes normal earnings (like employment and for the applicable period cannot have exceeded
self-employment earnings) in addition to CERB, $1,000.
CRSB, and CRCB. However, it does not include Special one-time payments
CRB. The repayment requirement is not applicable
to CERB, CRSB and CRCB. A number of special one-time/temporary COVID-19
related supplement payments have been made, or
CRB, CRSB, and CRCB all require $5,000 will be made, which are non-taxable. They include:
of earnings in the prior year. In some cases, an
individual may not have earned that much in either
2019 or 2020. However, another possibility is
WARNING: This information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a
further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this letter accepts any contractual,
tortuous, or any other form of liability for its contents or for any consequences arising from its use. Photocopying, replication or any other reproduction of the information
contained within the newsletter, for any reason, other than a single page for reference only is strictly prohibited. Copyrighted © Video Tax News Inc. 2021. Date of Issue –
January 2021. This periodical is published six times per year in January, March, May, July, September and November.
8Type Amount governments, municipalities, charities, employers
or friends/family. The wide breadth of possibilities is
OAS/GIS top-up up to $500
accompanied by a wide breadth of tax treatments.
GST Credit up to $443 While the issuer will often indicate their opinion on
supplement the tax treatment by the type of slip issued, or an
Disability Tax Credit up to $600 explanatory webpage or letter, this is not always
supplement so. The taxpayer may have to conduct their own
2019-20 Canada Child up to $300 per child analysis. Support broadly fits into one of three
Benefit (CCB) top-up categories.
2020-21 CCB top-up up to $1,200 per child
Taxable income
Canada Emergency Wage Subsidy (CEWS),
In addition to salaries and benefits being generally
Canada Emergency Rent Subsidy (CERS),
taxable, income replacement programs such as
10% Temporary Wage Subsidy (TWS)
CERB, CRB and EI are taxable as well. However,
While applicants for these programs will generally taxable income is not just limited to these three
be larger entities and corporations, it is possible programs. In general, any support received that
that sole proprietors may also be eligible for these was intended to replace or mimic these types of
subsidies. The amounts received under CEWS taxable income streams are also taxable. Similarly,
and CERS are taxable at the end of the period to support received to offset deductible business or
which they relate. Therefore, subsidies received by employment costs (such as wage subsidies) is also
individuals in 2021 may affect the 2020 tax year. For generally taxable.
the TWS, amounts must be included in income in
Amounts included in income but deducted from
the same as year as the remittances were reduced.
taxable income
Canada Emergency Bank Account (CEBA),
The most common example of this type of income is
Canada Emergency Commercial Rent
“social assistance”. Social assistance is comprised
Assistance (CECRA)
of amounts received on the basis of a means,
It is CRA’s position that the forgivable portion of the needs, or income test. They include payments
loans received under these programs are taxable in for food, clothing and shelter. Such payments are
the year in which they were received. Therefore, if generally reported on a T5007 slip. Items which
a loan under CEBA (for example) was received in fit into this category have two repercussions of
2020, but was not forgiven until a later point, the note. The income is to be included on the return of
taxpayer would still have to pay tax on the forgivable the higher spouse (if married or in a common-law
amount with the 2020 return. If the forgivable relationship), and it can also erode income-tested
portion was never forgiven, a deduction would be benefits, such as OAS.
available in the year in which the forgivable portion
Amounts not included in income at all
was repaid. There is also an election which allows
that income inclusion to be deferred until the next Support that was not related to taxable earning
year to offset the expense to which the forgivable endeavors, or which was received in an “individual”
portion relates. capacity (rather than employment or shareholder
capacity) is generally non-taxable. This could
Other benefits received
include, for example, a gift from a neighbour. It
Individuals may have received a number of is also possible to receive a payment from one’s
other types of payments or benefits from a wide employer in an individual capacity rather than as an
variety of sources, such as provincial/territorial employee. For example, CRA notes that financial
WARNING: This information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a
further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this letter accepts any contractual,
tortuous, or any other form of liability for its contents or for any consequences arising from its use. Photocopying, replication or any other reproduction of the information
contained within the newsletter, for any reason, other than a single page for reference only is strictly prohibited. Copyrighted © Video Tax News Inc. 2021. Date of Issue –
January 2021. This periodical is published six times per year in January, March, May, July, September and November.
9assistance payments to employees are received in • The payment is not based on employment
their capacity as an individual (non-taxable) if: factors such as performance, position, or years
of service.
• The individual was affected by a disaster.
• The payment is not made in exchange for past or
• The payment is philanthropic, to compensate future employment services or to compensate
the individual for personal losses or damage he for loss of income.
or she suffered during a disaster.
• The payment is not the regular salary paid to
• The payment is made within a reasonable time an individual who is unable to report to work
after a disaster. because of a disaster.
• The payment is voluntary, reasonable, and • The employer has not taken a business expense
bona fide. deduction for the payment.
• The payment is made to an individual dealing While the tax treatment of support will most often
with the company at arm’s length. be indicated by the payer in advance, a deeper
• The payment is not made to a shareholder, a dive may be required in situations where there is
connected person, or a person of influence. uncertainty.
CONCLUSION
The 2020 year has been like no other in recent history, and consequently, many new tax issues and benefits
have resulted. While additional flexibility is afforded in making deduction claims against employment expenses,
taxpayers must take care that they meet specific requirements. Likewise, specific criteria must be met to
ensure that otherwise taxable benefits, maintain their status as non-taxable for this particular year. Finally,
special care should be taken to determine whether all of the other benefits (non-employer provided) are
taxable, and in which year.
WARNING: This information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a
further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this letter accepts any contractual,
tortuous, or any other form of liability for its contents or for any consequences arising from its use. Photocopying, replication or any other reproduction of the information
contained within the newsletter, for any reason, other than a single page for reference only is strictly prohibited. Copyrighted © Video Tax News Inc. 2021. Date of Issue –
January 2021. This periodical is published six times per year in January, March, May, July, September and November.
10WARNING: This information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a
further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this letter accepts any contractual,
tortuous, or any other form of liability for its contents or for any consequences arising from its use. Photocopying, replication or any other reproduction of the information
contained within the newsletter, for any reason, other than a single page for reference only is strictly prohibited. Copyrighted © Video Tax News Inc. 2021. Date of Issue –
January 2021. This periodical is published six times per year in January, March, May, July, September and November.
11Toll Free: 1-877-438-2057 | Suite 220-9223 28 Ave NW, Edmonton, AB T6N 1N1, Canada | www.videotax.com 12
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