Canada Emergency Response Benefit (CERB) & Canada Recovery Benefit (CRB) could result in taxes owing

Did you take the CERB or CRB? This could result in taxes owing.

Launched in March, the Canada Emergency Response Benefit (CERB) provides $500 per week to workers who lost their jobs or most of their hours. Most employers deduct taxes from the paycheques before mailing them out, but that’s not the case with the CERB.

Recipients who took in the full amount available from the CERB — $12,000, at $500 per week between March 15 and Oct. 3 for up to 12 weeks — could owe taxes to the Canada Revenue Agency if they had even a small amount of other paid work this year.

 

How Much Will You Owe?

Anyone who qualifies for the CERB but earns less than the “basic personal amount,” which is $13,229 (CERB included) for 2020, does not have to pay taxes.

Incomes under $48,536 but above the basic personal amount will be taxed at 15% – including CERB payments. On a total CERB payment of $12,000, about $1,800 would be owed.

In Ontario, a taxpayer earning less than $44,741 or $41,725 respectively will owe the province about $600 on a $12,000 benefit.

The Canada Emergency Student Benefit (CESB), available to post-secondary students and recent graduates of high school, college, and university, up to $5,000 is also taxable income, but deductibles, credits for tuition, and moving living expenses can significantly reduce taxable income.

The CRB (Canada Recovery Benefit) was designed to replace the Canada Emergency Response Benefit (CERB), which is no longer in effect. The CRB is for employees who don’t qualify for EI and for those who are self-employed. The application for CRB runs from Sept. 27 for one year and provides $500 per week, for up to 26 weeks, to eligible applicants.

Like the CERB, the new CRB is taxable. However, the government is withholding a flat 10% tax at source from each CRB payment and will be credited against any income tax you need to pay for the year. The amount of tax you will actually owe, however, will depend on your total income for the year as the CRB will simply be added on top of your other income and taxed your marginal tax rate.

 

What Can You do to Prepare for Owing Taxes Back from taking the CERB or CRB?

If you’re receiving money (from CERB or CRB), you might be in some financial pain already. And it’s not easy to save up money to make sure that if there’s tax owing when you file in the next year, that you’re in a position to pay it. You need to start planning now, it’s important to do these estimates to know how much you need to set aside and if you are concerned about not being able to pay taxes, you need to contact CRA to arrange a payment plan. 

How to Owe less at Tax Time

There are other deductions coming out like the Home Office Tax Credit, and we are sure that other tax benefits and deductions will be coming out shortly. If you usually do your own taxes you might want to consider reaching out to us this more complicated tax year! Our tax professionals are ready to serve you!

Another OPTION is to plan for a deduction based on RRSP contributions, and the good news is is that we can help with your RRSP contributions as well as your taxes, what a great one-stop-shop! Contact us today!