On the back of an unprecedented year of employment and financial disruption due to the pandemic – including job losses, reduced hours, financial aid benefits, and working from home – it’s understandable that Canadians may face this tax season with a sense of confusion and dread. According to recent surveys from H&R Block Canada, one-in-three Canadians (34 per cent) report dreading the 2020 tax season more than usual, and one-in-four (26 per cent) say they are ‘clueless’ and rely on tax experts.
This sense of dread and confusion is likely contributing to Canadians putting off filing their taxes, with 60 per cent reporting they have not yet filed as of late March. While Canadians may be late to file, more than one-in-four (26 per cent) say they are relying on a tax refund due to this past year being such a tough financial year for them.
“There’s no doubt that this tax season is a bit of an enigma. We’re in unprecedented territory in terms of the extent of employment shifts, financial challenges, and emergency funding benefits received due to the impact of the pandemic through 2020,” said Peter Bruno, President at H&R Block Canada. “It’s inevitably a challenging tax year for many Canadians to navigate. What’s important is resisting the temptation to procrastinate, and to seek expert help if you are not sure how to maximise your tax return.”
Half of Canadians (50 per cent) report that their employment and/or financial situation were negatively impacted due to the pandemic. This includes changes in employment terms and income and/or receiving COVID-19 related financial benefits, which have contributed to confusion when it comes to filing their taxes with:
- 37 per cent who report not knowing how a reduction in income in 2020 will impact their tax situation
- 37 per cent who are not clear on the tax implications of claiming government benefits due to the pandemic
- 28 per cent who express confusion over how to claim work-from-home expenses
In light of financial challenges resulting from the pandemic, 38 per cent of Canadians also report having to dig into at least one form of savings in 2020, including 26 per cent who tapped into their personal savings and 17 per cent who dipped into their TFSA (Tax-Free Savings Account) or RRSP (Registered Retirement Savings Plan). Of those who tapped into their TFSA or RRSP, 31% are unclear on any tax implications.
Moreover, nearly half of Canadians (44 per cent) are concerned about this tax season in case they owe money and one-in-five (22 per cent) say they do not have the means to pay for taxes owed this season. One-in-three Canadians (36 per cent) say they have put saved less than $500 to cover tax surprises, including one-in-four (23 per cent) who have no savings at all to cover any money owed.
“Canadians also risk missing out on benefits if they don’t file their taxes,” adds Bruno. “We get it. Filing taxes is not something that most people look forward to, but don’t forget that each year nearly 19 million Canadians receive a refund. And on the back of such a tough year, getting that refund may count more than ever.”
For those who expect or are hoping for a tax refund, Canadians are taking a conservative approach in how they plan to use the money. For many, it will help them manage cashflow on the back of a challenging financial year, including:
- 23 per cent who plan to use it for everyday essentials
- 21 per cent would use it to pay off bills
- 28 per cent plan to pay down debt or the balance on their credit card
- 18 per cent plan to invest in a RRSP, RESP or TFSA
- 11 per cent would start or contribute to an emergency fund or savings account due to the continued uncertainty with the pandemic
- 11 per cent plan to splurge on treating themselves or family after such a tough year
- 8 per cent% plan to use the money to book a vacation once COVID restrictions lift
The H&R Block study also reveals that confusion around the financial repercussions of the pandemic and concern over owing money are not the only reasons that are fuelling Canadians to stall filing their taxes. Specifically, 32% say they have ‘not had the time’ to file, and 25 per cent say they are procrastinating just because ‘they hate filing their taxes.’
While the countdown is on with just a few weeks to go until the filing deadline on April 30th, 25 per cent of Canadians who have not yet filed say they plan do so before the end of March and another 55 per cent intend to file in the next two to three weeks. Finally, 9% among this group plan to file last-minute during the last week of April.