The landing page for the Canada Emergency Response Benefit is seen in Toronto, Monday, Aug. 10, 2020. THE CANADIAN PRESS/Giordano Ciampini

The landing page for the Canada Emergency Response Benefit is seen in Toronto, Monday, Aug. 10, 2020. THE CANADIAN PRESS/Giordano Ciampini

CERB recipients should be prepared to pay income tax on payments, experts say

The amount you received is considered taxable income, but Ottawa did not deduct any tax

The Canada Emergency Response Benefit was a financial lifeline for many when COVID-19 forced businesses to shutter and brought the economy to a screeching halt in the spring.

And while the $500-a-week cheques helped millions of Canadians to continue paying their bills and buying groceries, many likely didn’t give much thought to how the benefit would affect their taxes.

But as 2020 comes to a close, tax experts say now is the time to check and see if you might owe any income tax on the emergency benefit money you received this year or face an unpleasant surprise come tax time.

John Waters, director of tax consulting services at BMO Private Wealth, says it is important for people to understand that the CERB payments will have to be included in your taxable income.

“The critical thing here is of course, what is your marginal tax rate and what other sources of income do you have and that’ll dictate what tax will be owing,” Waters says.

CERB was designed to help those who lost work, got sick or were forced to quarantine or stay home to care for children.

If you received CERB benefits, the government will be issuing you a tax slip outlining the amount that you’ll need to include as income for your 2020 tax return.

The plan pays $500 a week for up to 28 weeks for a maximum amount of $14,000. The amount you received is considered taxable income, but Ottawa did not deduct any tax when they sent the money out to Canadians.

The federal basic personal amount — the amount you can earn before you start paying federal income tax — is $13,229 for 2020.

Waters said that means if you received the maximum CERB benefit and had no other income and no other tax credits, you will end up owing Ottawa a small amount.

“The main thing is probably to do some sort of a pro forma or estimate of your tax situation for 2020 … and get a ballpark idea of what type of tax that you might owe based on all of the income sources that you’ve got and maybe some deductions or credits,” he said.

Waters also said it would be a good idea to look back and check that you were entitled to all of the CERB payments that you did receive.

Jamie Golombek, managing director, tax and estate planning with CIBC, says the amount you might owe depends on how much other income you earned this year before or after you received CERB payments and what other deductions and tax credits you might have.

“If you had any other income in January, February or early March or you got back to work or worked part-time or you had some bit of income on the side, then you’re going to owe some money,” he says.

Golombek says it is better to find out now if you might owe money so you have time to set aside the cash rather than be scrambling come April when your tax return is due.

“Now you really have a good sense of where you are going to end up,” he said.

“If you are short, now could be a time to set aside an extra $25, $30, $40 a week to be able to pay those taxes come next spring.”

Golombek noted the government is withholding tax on the new benefit programs that replaced the CERB program this fall, but added even then it might not be enough.

“The withholding on those is only 10 per cent, so again that might not be sufficient for many Canadians so they may want to plan for that as well so it is not a surprise,” he said.

READ MORE: High-income earners in Canada collected CERB, pandemic-related data shows

Craig Wong, The Canadian Press


Like us on Facebook and follow us on Twitter.

Want to support local journalism during the pandemic? Make a donation here.

Coronavirustaxes

Just Posted

Black Press file photo
RCMP seek suspect in Vancouver Island-wide crime spree

Crimes stretched from Deep Bay to Qualicum, Ladysmith, Chemainus and Youbou

North Cowichan’s committee of the whole have rejected staff’s recommendation to limit the use of fireworks to Halloween. (File photo)
North Cowichan rejects limiting fireworks to Halloween

Municipality decides staff recommendation would be unpopular

Things are looking up for Vancouver Island as zero COVID-19 cases have been reported for the first time since October. THE CANADIAN PRESS/Darryl Dyck
Island records zero new COVID-19 cases for the first time since October

For the first time since October, the province is reporting zero new… Continue reading

CVRD Area E director Alison Nicholson, right, hiked two hours to Waterfall Camp at the Fairy Creek watershed along with Comox town councillor Nicole Minion and Comox Valley Regional District director Daniel Arbour to meet with old-growth logging activists on Monday, June 7. (Submitted)
Cowichan Valley regional director visits Fairy Creek protest camps

‘They clearly communicated that they are committed to what they are doing’

A small pod of Pacific white-sided dolphins pass by close to shore in Campbell River June 16, 2021. Still capture from video courtesy of Kimberly Hart
VIDEO: Dolphin sunset captured from Vancouver Island shore

Spectacular setting for view of travelling pod of Pacific white-sided dolphins

Karl and Stephanie Ann Johanson were thrilled to spot a pair of Sandhill Cranes in the Panama Flats this month, an unusual appearance for such birds. (Photo by Stephanie Ann Johanson)
WATCH: Sandhill cranes an unusual, joyful sight in South Island parkland

These birds don’t often touch down on their way between northern B.C. and Mexico

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

(V.I. Trail/Google Maps)
Now 90% complete, Vancouver Island trail forges new funding parnership

Victoria Foundation takes on Vancouver Island Trail Association; fund valued at $40,000

Police are asking for public assistance in locating Anthony Graham who has been charged with the murders of Kamloops brothers Carlo and Erick Fryer. (RCMP photo)
2 charged, suspect at large in killings of B.C. brothers linked to gang activity: RCMP

Kamloops brothers Erick and Carlo Fryer were found deceased in May on a remote Okanagan road

Albert Health Minister Tyler Shandro and Alberta Premier Jason Kenney unveil an opening sign after speaking about the Open for Summer Plan and next steps in the COVID-19 vaccine rollout, in Edmonton, Friday, June 18, 2021. THE CANADIAN PRESS/Jason Franson
Alberta 1st province in Canada to lift all COVID-19 public health restrictions

70.2% of eligible citizens 12 and older in the province have received a dose of the vaccine

Fraser Health registered nurse Ramn Manan draws a dose of the Pfizer COVID-19 vaccine into a syringe at a walk-up vaccination clinic at Bear Creek Park, in Surrey, B.C., on Monday, May 17, 2021. THE CANADIAN PRESS/Darryl Dyck
‘Honour our fathers’ with COVID-19 vaccine protection, B.C. urges

109 new cases Friday, 75 per cent of 12 and up immunized

Freighters have becomd abundant in the Trincomali Channel on the east side of Thetis Island.
Nanaimo ponders taking on waste from nearby anchored freighters

Vancouver-based Tymac petitioning the Regional District of Nanaimo to accept waste at its landfill

Most Read