CERB tax considerations
2020 has been a difficult year for many Canadians, individuals and business owners alike. With the COVID-19 pandemic, many have found themselves out of work, or requiring other benefits from the Canadian Government this year to make ends meet. For almost 7 million Canadians this meant receiving the Canadian Emergency Response Benefit, also known as the CERB. This $500/week ($2000/month) payment from the Canadian government allowed many Canadians to remain on their feet, and remain stable during these economic hardships. That said, there are some things to consider.
Taxable COVID-19 Benefits
Canada Emergency Response Benefit (CERB)
Canada Response Benefit (CRB)
Canada Recovery Caregiving Benefit (CRCB)
Canada Recovery Sickness Benefit (CRSB)
The CERB is Taxable
An important thing to remember for Canadians is that the CERB has no source deductions - which is that there will have been no taxes withheld by the Canadian government when it was issued to you. Which means you will have to pay taxes on that come your annual filing in 2021. How much will you have to pay? You will have to calculate that based on how much you made across 2020, to be able to fairly calculate it. Doing some tax prep with your accountant can help make sure everything goes smoothly.
CRB,CRCB,CRSB; Taxed but…
The CRB, CRCB and CRSB do received a small source taxation of 10%, but depending on how much you made this might not be enough based on your annual earnings. We recommend some dedicated tax planning, and putting some extra away just in case. If you have records you can use tools, such as Neuvoo’s Tax Calculator, which can be used to approximate how much your total taxes may be this year.
Depending on what kind of benefits you took this year, and what your income looked like (plus, any applicable tax credits you may have to pay) you might find yourself owing this year, for some for the first time ever. It can be stressful, but working with your accountant you can make sure any payments owing are manageable, and limited.