This post was sponsored by TurboTax, however, all views and opinions are mine.
When the coronavirus pandemic hit Canada early in 2020, the federal government introduced a suite of financial aids to manage the economic impact. The most popular of the financial assistance programs for individuals was the Canada Emergency Response Benefit (CERB).
Over 8.9 million Canadians benefitted from the CERB and $81.64 billion was paid out.
A second financial benefit specific to students was launched in April 2020. Referred to as the Canada Emergency Student Benefit (CESB), 708,440 Canadian benefitted from this program and $2.94 billion had been paid out as of October 20, 2020.
Following the end of the CERB on September 26, 2020, the government introduced an updated Employment Insurance (EI) program and a new Canada Recovery Benefit (CRB) for workers who don’t qualify for EI.
Is the CERB taxable? If you received CERB benefits during the 2020 tax year, how much taxes will you owe?
Read on to learn about what to expect when you file your tax return in the New Year and options for filing your return.
Canada Emergency Response Benefit (CERB)
The CERB was available from March 15, 2020, to September 26, 2020.
Applicants who were eligible for the benefit received $500 per week for up to 28 weeks (or $2,000 per month for up to 7 months).
This means that if you collected CERB for the entire 7 pay periods, you received $14,000 in total.
Is the CERB Taxable?
Yes, Canada Revenue Agency (CRA) considers CERB as taxable income and will send recipients a T4A to report this income on their 2020 tax return.
Unlike your regular employment income where your employer withholds taxes for the CRA, CERB payments were not taxed at source and how much you end up owing in taxes will depend on your total income for the year.
If you have received a notice from the CRA stating that you need to return or repay CERB benefits, consider doing so before the end of the year.
As per CRA, if you return a CERB payment before December 31, 2020, it does not impact your taxes for 2020.
However, if your repayment occurs in 2021, you will be required to pay tax on the amount.
How To Calculate Your CERB Taxes
The amount of CERB taxes you have to pay depends on how much CERB you received and your total taxable income in 2020.
Canadians pay both federal and provincial taxes on their income. For the 2020 tax year, the federal tax rates for different tax brackets were:
- Up to $48,535: 15%
- $48,536 to $97,069: 20.50%
- $97,070 to $150,473: 26%
- $150,474 to $214,368: 29%
- $214,369 and over: 33%
You can find your provincial tax rates here.
If you received the maximum CERB amount of $14,000 and that was all your income in 2020, your income taxes are going to be minimal.
This is because the federal basic personal amount for 2020 was up to $13,229. When you deduct this and the other tax credits and deductions you qualify for (e.g. medical expenses, childcare expenses, student loan interest, donations, etc.), your tax liability could become $0.
Canadian provinces also have tax credits and deductions, including a basic personal amount (BPA) which lower your taxable income. For example, the BPA in Ontario in 2020 is $10,783.
If you earned other income apart from the CERB in 2020, you will also need to take that into consideration.
A tax calculator can help you estimate your total tax burden.
Using the calculator, an Ontario resident who received $14,000 in untaxed CERB income would owe roughly $116 when only the BPA is taken into consideration.
If the same individual had $25,000 in taxable regular income and no tax was withheld, they would owe $2,483 in Ontario.
If you are owing taxes, aim to pay them before the tax deadline which is on April 30, 2021, for individuals. After the deadline date, the CRA levies a tax penalty every month on the amount you are owing.
Canada Emergency Student Benefit (CESB) Taxes
The CESB was provided to eligible students from May 10, 2020, for a maximum of up to 16 weeks.
It paid out a regular benefit of $1,250 for each 4-week period or $2000 per 4-week period to applicants who had dependents or who were disabled.
The CESB is taxable income and CRA will send you a T4A slip. Depending on what your total taxable income is at the end of the year, you may or may not owe taxes.
Similar to the CERB, if you are required to repay CESB and you do so before December 31, 2020, the amount won’t be included on your T4A.
Related: Work From Home Tax Deductions
Canada Recovery Benefit (CRB)
The CRB was introduced on September 27, 2020, to help Canadian workers who could not access employment insurance. The benefit provides $500 per week for up to 26 weeks to eligible applicants.
Unlike the CERB and CESB, a 10% tax is withheld at source from your CRB benefits.
CRB-recipients are allowed to work and earn other income while collecting CRB. Depending on how much your total income is and the taxes you pay at source, you may or may not owe taxes come next spring.
A CRB- clawback is also applied to net income exceeding $38,000.
In addition to the CRB, Canadians may also qualify for the:
- Canada Recovery Caregiving Benefit (CRCB), and
- Canada Recovery Sickness Benefit (CRSB)
How To File Your Taxes in Canada
If you have received CERB payments, you should start preparing for tax season.
There are various ways to file your taxes in Canada, including using an online tax software or an accountant.
A CRA-certified tax software such as TurboTax can help you complete your tax return easily from the comfort of your home.
TurboTax offers a variety of options:
1. TurboTax Online: You can select a product meeting your needs including the standard and premier personal versions or one for self-employed individuals.
The TurboTax Online software handles all types of tax situations including simple returns and complicated ones with investments, rental income, and more.
Using CRA’s auto-fill options, you can easily import your tax data from CRA (including CERB income) to TurboTax. This tax software can be used for individual, student, and family returns.
2. TurboTax Live Assist & Review: This service gives you access to tax experts so you can ask unlimited questions and get advice relating to your taxes.
A TurboTax expert also completes a review of your return before you file it.
3. TurboTax Live Full Service: If you’d rather have someone complete your tax return on your behalf, this premium tax package is for you.
After you upload your documents and answer a few questions, a tax expert does your taxes and files it on your behalf.
The CERB was instrumental in helping many Canadians weather the economic challenges caused by the COVID-19 pandemic.
Depending on your total income for the year (including CERB payments), you may need to set aside funds to pay off your taxes in early 2021.
Even if you are not owing taxes on CERB, you should still plan to file an income tax and benefits return, as the CRA uses this to assess whether you qualify for government benefits e.g. Canada Child Benefits or GST/HST Credit.
TurboTax offers a tax preparation service for all tax situations and you can learn more here.