At the end of this month 2020 will be half over. I had big hopes for this year. I hoped that the year 2020 would be like 2020 vision and we would have an excellent year. So far 2020 has disappointed me.
Every year you make plans. A good business plan has a complete list of assumptions. When you made your 2020 business plan, you likely did not list as one of your assumptions that a global pandemic was going to affect the economy this year. So far 2020 is all about the pandemic.
Governments have faced choices between health and the economy. We have seen that in the effort to flatten the curve we have seen business revenue flattened. Business owners are making adjustments and calculating their new breakeven numbers. It is now time to take a look at the remainder of 2020 and make a new plan. What new assumptions should you be making in order to navigate the rest of 2020 profitably?
The Canada Emergency Response Benefit, known as CERB is a taxable payment. For many employees this will be the first time that they have received a “pay cheque” that does not have any tax taken from it. Odds are that everyone who received CERB in 2020 is going to owe tax when they file their personal income tax return in April of 2021. People who usually get refunds will not be getting refunds next spring.
Normally your employer withholds taxes from your pay and sends that money to CRA on your behalf. This is not happening with CERB. I have heard people say that they were making more money on CERB. The CERB payment is $500 a week before taxes, which is likely is going to be $350 or less after tax is calculated on that payment. So now that you are back to work you are receiving an after tax paycheque. On CERB you were getting a before tax paycheque and you are going to have to pay the tax next spring.
It would be a great idea to start setting aside some funds to pay next springs taxes, so that you can pay it next spring and not have to pay any additional interest on the taxes you are going to owe.
This has been a very confusing year for the filing of personal income tax returns. When is your return due?
• June 1st for people who do not report self-employment income
• June 15th for people who do report self-employment income on their personal income tax return.
However, payment is not due until September 1st, 2020. If you pay your tax bill by September 1st then there is no late filing penalty. If you cannot pay your bill by September 1stthen you will have a late filing penalty if you miss the above deadline.
So, the deadline for filing tax returns is only extended to September 1st if you are able to pay by September 1st. If you don’t think you can pay by September 1st then you had better get the return filed by June 15th, 2020.