‘People should be aware these are taxable benefits’: Tax-planning for CERB

‘People should be aware these are taxable benefits’: Tax-planning for CERB

Canada Emergency Response Benefit provides workers who lost their jobs or most of their hours with $500 per week

Many Canadians are just trying to get through the week, never mind the year, when it comes to their finances.

But accountants say it’s already time to start taking stock of government support and wages received since the COVID-19 pandemic struck.

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

“My first piece of advice is people should be aware these are taxable benefits,” said Fred O’Riordan, national tax policy leader at Ernst & Young. “Ultimately they are going to be responsible for having received them and for declaring them.”

That means Ottawa and the provinces will claw back some of the $61.3 billion in CERB paid to 8.4 million Canadians as of July 19.

It also means 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.

Anyone who qualifies for the CERB but earns less than the “basic personal amount,” which Ottawa is raising to $13,229 from $12,069 for 2020 — does not have to pay tax, including on their CERB instalments.

Incomes under $48,536 but above the basic personal amount will be taxed at 15 per cent — the lowest income tax rate for 2020 — including CERB payments. On a total CERB payment of $12,000, about $1,800 would be owing to Ottawa.

“Obviously if you’re in receipt of this money, you’re 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 next that you’re in a position to pay it,” said O’Riordan.

He emphasized the need to start planning now, particularly as the provinces plan to retrieve their cut as well.

ALSO READ: CERB to be extended by eight weeks amid gradual post-COVID reopening: Trudeau

In Ontario and British Columbia, a taxpayer earning less than $44,741 or $41,725 respectively will owe the province about $600 on a $12,000 benefit. Albertans earning under $131,220 would owe $1,200 while low-income Quebecers would have to pay $1,800.

Canadians out of a job due to the pandemic and who made less than $1,000 per month at any point since mid-March qualify for a CERB payment (provided they made at least $5,000 last year), but if earnings crossed that monthly threshold without their realizing or declaring it, they may have received CERB monies they were not eligible for.

“There really weren’t many controls at the front of this. Generally, people who have applied have received it.,” O’Riordan said.

“Some people will be tempted if they’ve received money that they don’t qualify for to sort of play the lottery game. But I would never recommend that, because it’s pretty simple for the agency, through its algorithms, to determine whether people are eligible or not.”

O’Riordan suggested informing the CRA of any extra payments before Dec. 31.

For those concerned about not being able to pay their taxes, experts recommend contacting the CRA to work out a payment plan.

“You might be in a lower tax bracket now … so it’s important to do those estimates to know how much you need to set aside,” said Joseph Micallef, a tax partner at KPMG based in Toronto.

On the other hand, Canadians who have lost out on expected income for part of the year may be eligible for child credits or GST/HST credits they would not have qualified for previously.

Another option is to plan for a deduction based on RRSP contributions, but the deferred tax would likely not amount to much, said Montreal-based tax specialist Omar Yassine.

“In my opinion, if a taxpayer has seen their income decrease significantly due to COVID-19 they should not use part of the unused RRSP contributions for 2020.”

Small business owners who have permanently closed shop still have tax obligations and must file in April for 2020-21, Yassine noted. But operational losses can be applied against taxable income for the past three years, which could result in a tax refund.

Business owners who have filed for bankruptcy should consult accountants or tax specialists, he said.

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

On Monday, the CRA further extended the payment due date for 2019 tax returns to Sept. 30 from Sept. 1, 2020.

Christopher Reynolds, The Canadian Press

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

Coronavirus

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

(Black Press Media photo)
Geriatric psychiatrist stresses importance of senior mental health

Dr. Hem Phaterpekar talks hope and healthy living amid COVID-19 pandemic

B.C. Supreme Court in Vancouver. (File photo: Tom Zytaruk)
Surrey, Langley twin brothers who own companies together battle in court

Presiding judge described Surrey resident Kerry Hawley and Langley resident Kelly Petersen as ‘self-made successes’

Aldergrove Library (Aldergrove Star files)
Aldergrove library hopes to reintroduce senior’s programming later in the year

Zoom gatherings including author talks, book clubs, and knitting groups are in the works

Aldergrove Star files
Township of Langley opens up volunteer award nominations

Awards for youth, coaches, and ‘Langley life enhancers’ are up for grabs

H.D. Stafford Middle School has recorded its second COVID-19 exposure since the resumption of classes in January. (Google Map)
H.D. Stafford Middle School records another COVID-19 exposure

This is the second reported case since resumption of classes in January

A woman wears a face mask and shield to curb the spread of COVID-19 while walking in North Vancouver, B.C., on Wednesday, January 6, 2020. THE CANADIAN PRESS/Darryl Dyck
536 COVID cases, 7 deaths reported as B.C. find its first case of South African variant

Henry said 69,746 people have received their first dose of the COVID vaccine.

Alan Davidson was sentenced to almost six years for abusing seven boys in the late 1970s and early 1990s. (Canadian Press file)
Full parole granted to former Mountie, sports coach convicted of sex abuse of boys

Alan Davidson convicted of abusing boys in B.C. and Saskatchewan in late ’70s, early ’90s

Letisha Reimer died Nov. 1, 2016 after being stabbed at Abbotsford Senior Secondary.
No evidence that killer was in ‘psychotic state’ during Abbotsford school stabbing: Crown

Second day of closing arguments at ‘not criminally responsible’ hearing for Gabriel Klein

The first COVID-19 vaccine arrives in B.C. in temperature-controlled containers, Dec. 13, 2020. (B.C. government)
More vaccine arrives as B.C. struggles with remote COVID-19 cases

Long-term care homes remain focus for public health

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

The first Pfizer-BioNTech COVID-19 vaccine dose in Canada is prepared at The Michener Institute in Toronto on Monday, Dec. 14, 2020. THE CANADIAN PRESS/Frank Gunn
Doses of COVID-19 vaccine expected in 60 B.C. First Nations by next week

B.C. has allocated 25,000 doses of COVID-19 vaccine to First Nations for distribution by the end of February

Kamloops-South Thompson MLA Todd Stone questions the NDP government in the B.C. legislature, Feb. 25, 2020. (Hansard TV)
Todd Stone says he’s not running for B.C. Liberal leadership

Kamloops MLA was widely viewed as a front-runner

Wireless voice and data services are out for those on Telus as of Thursday (Jan. 14) afternoon across Western Canada, Telus Support said in a recent Tweet. (Black Press file photo)
UPDATE: Telus services restored across Western Canada

Telus said they are monitoring the situation to ensure connections remain stable

Screenshot from video.
2 students arrested in assault of transgender girl at Lower Mainland school

Mother says daughter was targeted because of how she identifies

Most Read