‘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

Sean Hart, 34, unexpectedly left the Seven Oaks Tertiary Mental Health Facility in Saanich on Nov. 6, 2020 and has now been missing for six months. (Photo courtesy Penny Hart)
Search continues for Saanich man Sean Hart six months after his disappearance

Support from community, police keeps his mother hopeful

Oak Bay resident Hugh Thompson died Friday, May 7. (GoFundMe photo)
Oak Bay dad dies mountain biking near Shawnigan Lake

Community rallies around family with online fundraiser

Daniel Foster, last seen in downtown Parksville on Saturday, May 1. (submitted photo)
RCMP seek help locating missing Victoria man, last spotted in Parksville

Daniel Foster, 43, seen via surveillance camera using an ATM

Police stopped, then let go this man and his large collection of cans during a stop Monday morning on Resthaven Drive. Police had received a report of a possible theft, but let him go after he had returned the property, which he believed was his to take after being left out in public. (Wolf Depner/News Staff)
Report of theft, balancing act on Sidney street draws curious onlookers

Incident happened just before 8:30 a.m. opposite of Vancouver Island Regional Library branch

Victoria Police Department looks to identify a person of interest after a Friday night stabbing. (VicPD handout)
Police seek person of interest after Victoria stabbing

Friday night assault leaves one with potentially life-altering injuries

A bullet hole is seen in the windshield of an RCMP vehicle approximately 4 km from Vancouver International Airport after a one person was killed during a shooting outside the international departures terminal at the airport, in Richmond, B.C., Sunday, May 9, 2021. THE CANADIAN PRESS/Darryl Dyck
Homicide team IDs man in fatal YVR shooting as police grapple with spate of gang violence

Man, 20, charged in separate fatal shooting Burnaby over the weekend

RCMP are searching for Philip Toner, who is a ‘person of interest’ in the investigation of a suspicious death in Kootenay National Park last week. Photo courtesy BC RCMP.
RCMP identify ‘person of interest’ in Kootenay National Park suspicious death

Police are looking for Philip Toner, who was known to a woman found dead near Radium last week

Vancouver Canucks goaltender Thatcher Demko (35) makes a save on Winnipeg Jets’ Nate Thompson (11) during second period NHL action in Winnipeg, Monday, May 10, 2021. THE CANADIAN PRESS/Fred Greenslade
Vancouver Canucks see NHL playoff hopes dashed despite 3-1 win over Winnipeg

Montreal Canadiens earn final North Division post-season spot

The B.C. legislature went from 85 seats to 87 before the 2017 election, causing a reorganization with curved rows and new desks squeezed in at the back. The next electoral boundary review could see another six seats added. (Black Press files)
B.C. election law could add six seats, remove rural protection

North, Kootenays could lose seats as cities gain more

The Independent Investigations Office of B.C. is investigating the shooting of an Indigenous woman in the Ucluelet First Nation community of Hitacu. (Black Press Media file photo)
B.C. First Nation wants ‘massive change’ after its 3rd police shooting in less than a year

Nuu-chah-nulth woman recovering from gunshot wounds in weekend incident near Ucluelet

Nurse Gurinder Rai, left, administers the Moderna COVID-19 vaccine to Maria Yule at a Fraser Health drive-thru vaccination site, in Coquitlam, B.C., on Wednesday, May 5, 2021. The site is open for vaccinations 11 hours per day to those who have pre-booked an appointment. THE CANADIAN PRESS/Darryl Dyck
COVID vaccine bookings to open for adults 40+, or 18+ in hotspots, across B.C.

Only people who have registered will get their alert to book

Dr. Victoria Lee, CEO of Fraser Health, hosts an update on efforts to contain B.C.’s COVID-19 transmission in Surrey and the Fraser Valley and protect hospitals in the Lower Mainland, May 6, 2021. (B.C. government video)
B.C.’s COVID-19 infection rate slowing, 20 more people die

Deaths include two people in their 40s, two in their 50s

Most Read