‘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

Just Posted

Port Alberni’s first movie theatre, started before 1920, was originally located on First Avenue, across from Alberni Hardware. This photo is one of 24,000 included in the Alberni Valley Museum’s online archives, available for public viewing at https://portalberni.pastperfectonline.com. (PHOTO PN09360 COURTESY ALBERNI VALLEY MUSEUM)
LOOK BACK: Port Alberni’s first movie theatre

The Port Theatre was destroyed by a fire in 1952

The North Island College campus in Port Alberni is located on Roger Street. (SUBMITTED PHOTO)
North Island College to offer digital and in-person classes this fall

In-person classes will be able to resume in September

B.C. Centre for Disease Control data showing new cases by local health area for the week of May 2-8. (BCCDC image)
Vancouver Island COVID-19 local case counts the lowest they’ve been all year

On some areas of Island, more than 60 per cent of adults have received a vaccine dose

A nurse gets a swab ready to perform a test on a patient at a drive-in COVID-19 clinic in Montreal, on Wednesday, October 21, 2020. THE CANADIAN PRESS/Paul Chiasson
Island’s daily COVID-19 case count drops below 10 for just the second time in 2021

Province reports 8 new COVID-19 cases on Vancouver Island Wednesday

Ancient Forest Alliance campaigner Andrea Inness walks beside an enormous western red cedar stump in a BCTS-issued cutblock in the Nahmint Valley. (PHOTO COURTESY TJ WATT)
B.C. forestry watchdog finds lack of compliance in Nahmint logging

Forest Practices Board says old growth and biodiversity near Port Alberni are at risk

Daily confirmed COVID-19 cases reported to B.C. public health, seven-day rolling average in white, to May 12, 2021. (B.C. Centre for Disease Control)
B.C. preparing ‘Restart 2.0’ from COVID-19 as June approaches

Daily infections fall below 500 Friday, down to 387 in hospital

On Friday, May 14 at Meadow Gardens Golf Club in Pitt Meadows, Michael Caan joined a very elite club of golfers who have shot under 60 (Instagram)
Crowds at English Bay were blasted with a large beam of light from an RCMP Air-1 helicopter on Friday, May 14. THE CANADIAN PRESS/Marc Grandmaison
Police enlist RCMP helicopter to disperse thousands crowded on Vancouver beach

On Friday night, police were witness to ‘several thousand people staying well into the evening’

Sinikka Gay Elliott was reported missing on Salt Spring Island on Wednesday, May 12. (Courtesty Salt Spring RCMP)
Body of UBC professor found on Salt Spring Island, no foul play suspected

Sinikka Elliott taught sociology at the university

The first Black judge named to the BC Supreme Court, Selwyn Romilly, was handcuffed at 9:15 a.m. May 14 while walking along the seawall. (YouTube/Screen grab)
Police apologize after wrongly arresting B.C.’s first Black Supreme Court Justice

At 81 years old, the retired judge was handcuffed in public while out for a walk Friday morning

Queen Elizabeth II and Clive Holland, deputy commonwealth president of the Royal Life Saving Society, top left, virtually present Dr. Steve Beerman, top right, with the King Edward VII Cup for his drowning-prevention work. Tanner Gorille and Sarah Downs were honoured with Russell Medals for their life-saving resuscitation. (Buckingham Palace photo)
Queen presents Vancouver Island doctor with award for global drowning prevention

Dr. Steve Beerman receives Royal Life Saving Society’s King Edward VII Cup at virtual ceremony

Former UFV Cascades wrestling coach Arjan Singh Bhullar is now the ONE heavyweight champion after defeating Brandon Vera via TKO in round two on Saturday in Singapore. (ONE Championship)
Former UFV wrestling coach wins MMA championship

Arjan Singh Bhullar captures ONE heavyweight title, first Indian origin fighter to achieve honour

Astra Zeneca vaccine waits for injection in a Feb. 3, 2021 file photo. A Langley man has become the second B.C. resident to suffer a blood clot following an injection. (AP Photo/Frank Augstein)
B.C. man required emergency surgery after AstraZeneca vaccination

Shaun Mulldoon suffered ‘massive blood clot’ after jab

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

Most Read