What’s New for 2021 T1 Tax returns?

Introduction

As practicing CPAs, we need to be updated with the changes made by either government or CRA towards businesses. We have to be very active as our one mistake can make millions of dollars loss for the client. Let’s understand what CRA changes in 2021’s T1 return filling program.

Here we mention some changes to keep in mind for the busy tax season.

1. Electronic communication with the CRA

To digitalize the touch, the 2021 budget proposed to send notice of assessment digitally without the taxpayer’s authorization. It will apply to those individuals who are either filing their tax returns electronically themselves or taking help from a tax preparer. It won’t affect individuals who file T1 return to CRA in paper format.

Home Office Expenses:  The guidelines issued to employees last year who are working from home due to COVID-19 are extended, and this deduction will be available to them. There are two methods for computing deductions from home office expenses – Temporary flat rate method & detailed method

2. Employer-provided benefits and allowances:

a. Commuting cost: If the employee continues to perform their employment duties at the office and the employer provides the commuting cost reimbursement during a pandemic, then this reimbursement will not include the additional income.

Suppose the employee is working from home and has to travel for transferring the necessary equipment, and the employer provides a motor vehicle or an additional amount. In that case, CRA will not charge the additional amount into the employee’s income.

b.  Home office equipment: Any amount reimbursed by the employer to the employee for computer and home office equipment for performing their duties is out of taxable income by CRA up to $500 per employee. If the amount reimbursed by the employer is more than $500, then the excess amount beyond $500 will be added to the employee’s income.

c. Meal cost: If the meal cost of an employee is paid or reimbursed by the employer at the regular place of employment, then the amount paid by the employer is added to the employee’s income as a taxable allowance.

3. Climate Action Incentive (CAI):

The CAI is no longer a refundable tax credit and, as such, not part of a tax refund. Beginning with the 2021 Tax year, CAI payments will change from refundable credit claimed annually on personal tax returns to quarterly payments paid through the benefits system. click here for more.

4. Relief to cross-border workers:

The CRA has updated its guidance to extend the administrative relief provided to Canadian-resident cross-border workers regarding their 2020 tax obligations to also apply to 2021.

5. COVID-19 benefits:

If you received CRA benefits in 2021, such as the Canada Recovery Benefit, you will receive a T4A information slip by the end of February 2022. Quebec residents will receive a T4A slip as well as an RL-1 slip. Information slips, including information for COVID-19-related benefits, are also available in certified tax filing software via the Auto-fill my return service.

6. New Benefits & Credits :

Canada worker’s Lockdown benefit:

CRA added a new benefit in 2021. For more information, click here.

Canada Training Credit:

The Canada training credit (CTC) is a new refundable tax credit to help Canadians with the cost of eligible training fees. You can read more about this here.

7. Multi-factor authentication has been added to your account:

To help make our CRA sign-in services more secure, CRA added multi-factor authentication for all users! We’ve added a new passcode grid option to ensure that everyone can use it.

We hope that the information provided above will assist you in providing better service to your clients. You can contact us if you have any queries.