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

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

Just Posted

The Nisga’a Valley Health Authority reported an isolated cluster of COVID-19 cases among non-direct care staff at the New Aiyansh Health Centre. (Gary Fiegehen/Nisga’a Lisims Government)
New Aiyansh Health Centre experiencing COVID-19 cluster among non-direct care staff

Nisga’a Valley Health Authority asking residents to cancel appointments outside the Nass Valley

A photo of the CervixCheck at-home test kit, developed by Eve Medical. (Submitted Photo/Katina Pollard, Métis Nation British Columbia)
Pilot project puts cancer screening into the hands of northwest B.C. women

Métis women experience barriers to cervical cancer screening

Brett Alexander Jones is wanted on several warrants province-wide, in connection with multiple charges. Jan. 21, 2021. Kitimat RCMP photo
Kitimat RCMP searching for man wanted on several warrants province-wide

Jones is described as a five-foot 10-inches Caucasian man, with blond hair and blue eyes.

The Nisga’a Lisims Government has extended its state of local emergency. (File photo)
Nisga’a state of local emergency extended, vaccines delayed

There are 21 active COVID-19 cases in the Nisga’a Valley Health Authority

Businesses continue to struggle under COVID-19 restrictions as the pandemic reaches the one-year mark. (B.C. government)
Another 564 COVID-19 cases, mass vaccine plan coming Friday

15 more deaths, community cluster declared in Williams Lake

A specialized RCMP team is investigating a suspicious trailer, which might have connections to the illicit drug trade, found abandoned outside a Cache Creek motel. (Photo credit: <em>Journal</em> files)
Police probe U-Haul trailer linked to illicit drugs left outside Cache Creek motel

Hazardous materials found inside believed to be consistent with the production of illicit drugs

Premier John Horgan leaves the podium following his first press conference of the year as he comments on various questions from the media in the Press Gallery at B.C. Legislature in Victoria, B.C., on Monday, January 13, 2020. THE CANADIAN PRESS/Chad Hipolito
Interprovincial travel restrictions a no-go, Horgan says after reviewing legal options

The B.C. NDP government sought legal advice as concerns of travel continue

Gem Lake Top, at Big White Ski Resort, seen at Jan. 8. (Big White Ski Resort)
Big White cancels $7.3M in lift tickets, accommodations due to COVID-19 orders

Since November, the ski resort has been forced to make several changes

Darlene Curylo scratched a $3M ticket, BCLC’s largest ever scratch and win prize. (BCLC)
Kelowna woman in shock after winning BCLC’s largest-ever instant-ticket prize

Darlene Curylo couldn’t believe her eyes when she saw the amount of money she’d won from a scratch ticket

While each person has different reasons for becoming homeless, a UBCO study shows they learn through their interactions with different services to perform ‘as homeless’ based on the expectations of service providers. (Contributed)
Kelowna homeless forced to ‘perform’ for resources, says UBCO study

One participant in the study said ‘It is about looking homeless, but not too homeless’

Gov. Gen. Julie Payette takes the royal salute from the Guard of Honour as she makes her way deliver the the throne speech, Wednesday, September 23, 2020 in Ottawa. THE CANADIAN PRESS/Fred Chartrand
Gov. Gen. Julie Payette resigns, apologizes for ‘tensions’ at Rideau Hall

Payette, who is the Queen’s representative in Canada, has been the governor general since 2017

Grounded WestJet Boeing 737 Max aircraft are shown at the airline’s facilities in Calgary, Alta., Tuesday, May 7, 2019. WestJet will operate the first commercial Boeing 737 Max flight in Canada today since the aircraft was grounded in 2019 following two deadly crashes. THE CANADIAN PRESS/Jeff McIntosh
Passengers unfazed as WestJet returns Boeing 737 Max to service on Vancouver flight

After a lengthy review process, Transport Canada cleared the plane to return to Canadian airspace

The top part of the fossil burrow, seen from the side, with feathery lines from the disturbance of the soil – thought to be caused by the worm pulling prey into the burrow. (Paleoenvironntal Sediment Laboratory/National Taiwan University)
PHOTOS: SFU researchers find evidence of ‘giant’ predatory worms on ocean floor

Fossils found the prove the existence of an ancient Taiwanese worm as long as two metres

Most Read