Last year, thousands of Ontarians readily accepted government financial assistance from programs like CERB to help keep afloat during the pandemic. However, as the tax filing deadline approaches, many are wondering how these payouts will affect their returns this year.
"Don't expect your normal refunds back this year," warns Bradford accountant Heather Bishop Haddon.
“It’s going to be a bigger deal this year,” notes Haddon, who has been working around the clock processing returns this month. “[The government] was offering tax-free CERB with no ‘checks’ and people were excited to take the money. A lot of people took it that shouldn’t have.”
Haddon has worked 20+ years in the financial planning industry and has been filing taxes for local residents for the past eight. With last year's grants, loans, and CERB payments, she says residents should expect to see a ‘shift’ in their returns this year, which will affect baby bonuses, trillium benefits, and GST/HST credits.
“On any given year, so many circumstances can change what your income is - did you move, change jobs, sold a house, had a baby? But that percentage of people that took payouts like CERB that should not have, can expect to have a review at some point,” notes Haddon. “For us [accountants], it’s just more entries, but it’s certainly a check in balance for many that took what they didn’t need during that time.”
Haddon adds there will be at least a 20 percent increase in random audits this year due to the payouts from 2020. Four new boxes have been added to this year’s T4 form, which are broken down into four separate time periods where an individual earned (or collected) income. These periods will be cross-referenced with government payouts and other sources of income received last year.
“There’s a lot of people trying to make claims this year that won’t hold up with CRA,” warns Haddon. “For example, a lot of daycares were closed but people may try to submit receipts anyways… or landlords that gave renters relief, those renters may still try to submit rent receipts… it’s not going to fly - there will always be somebody that will get caught on it.”
Haddon says seniors are at risk of making an error on their taxes, as some topped up their pensions with CERB payments but were not working at the time.
She encourages everyone to double check before submitting.
“My lesson in all of this for people is if you were just floating and you have no idea about your taxes, ask questions!” suggests Haddon. “CRA has the ability to request bank transactions without you knowing, subpoena your Paypal account. Deep into bitcoin? If you are trading on any platform, they can see your trading records too… They really are the ‘big brother'.”
As for deadlines for filing, everything is "back to normal" and if taxes aren't filed on time, interest charges will be added. For those who do file on time, there is an interest relief program that will waive fees for the year.
“Deadlines are not being delayed this year,” says Haddon. “If you owe money but file on time, you can get interest relief up until next year."
A reminder to those who receive child tax benefits and other credits, not filing on time can delay payments.
“Your child tax benefit is based on family income, so if you took CERB last year, it’s pushed your income higher… that’s being used to calculate your baby bonus, so expect to see that amount go down. It changes your trillium benefits, GST... it’s a whole trickle-down effect.”
To date, Haddon has accepted and filed over 700 returns and still has over 300 more to process. Friday at midnight marks the deadline for personal returns, and June 15 for business taxes.
To help with the influx of returns, Haddon hired her daughter Emily last year as her ‘Director of Client Communications’ to help with intakes, emails, and invoicing so Haddon could focus on processing more returns.
“It’s been an eye opener for everyone… people are learning now more than ever, they need to do more financial planning," says Haddon. “This wave is going to hurt businesses more than the last time… the best is certainly a way off unfortunately.”