2020 Tax Season:  Will Small Business Owners Get Interest Relief?

Evelyn Jacks

Unincorporated business owners, including gig workers, have until Tuesday June 15 to file their T1 returns without penalty. The government has made it clear that late filing penalties will be applied this year; that happens when you have a balance due as of the filing due date. However, will there be flexibility on interest charges? Yes, but not in every case and business owners must pay attention to this. 

This year, the only taxpayers who will receive interest relief are those who actually file their 2020 tax return and meet the following two criteria:

• Total 2020 taxable income is $75,000 or less
• A pandemic relief provision was received in 2020: CERB, CESB, CRB, CRCB, CRSB, EI or provincial emergency benefits.

In other words, even if taxable income is under $75,000, taxpayers will not qualify for interest relief unless they specifically received one of these benefits.  Notice that the list does not include the Canda Emergency Business Account (CEBA) loan or the Canada Emergency Rent Subsudy (CERS) commonly applied for by business owners.

Many small business owners will owe money if their 2020 income remained relatively stable, but their instalment payments were not sufficient. They could also be pushed into the payable zone if they owe Canada Pension Plan premiums based on their net income level.  Those premiums have been on the rise, as shown below.  The self-employed with net income from their business of $58,700 will owe twice the contribution rate of 5.25% or  a maximum of $5,796.00 in addition to their taxes owing.

For those business owners who experienced a drop in income, it’s possible that balances due will be much lower, which will be a relief.  Instalment payments for 2021 should be adjusted in this case. These business owners may also find that they qualify for refundable tax credits for the first time, especially if there are children in the family.  Those extra dollars, however, won’t appear until July.

Bottom line:  Small business owners who are owing money to the government should always file by April 30, to avoid interest charges. 

Additional educational resources:  Learn more by taking the Filing Proprietorship Returns Certificate Course.