In response to the economic hardships created by the COVID-19 pandemic, the government of Canada implemented several COVID-19 benefit programs. The most commonly claimed programs by individuals were the Canada Emergency Response Benefit (CERB) and the Canada Recovery Benefit (CRB).
Most of the COVID-19 benefits, including the CERB and CRB are taxable income. If you received income from these programs be prepared to pay additional tax on these amounts. The team at Clearly Financials would like to share some information to help individuals and families in our local Edmonton community prepare for their 2020 personal taxes.
CERB: Canada Emergency Response Benefit
Benefits of $2,000 per four week period were paid to recipients.
Tax was not withheld at source. If you received income from CERB you should be prepared to pay tax on this benefit at your marginal tax rate. A tax rate guide may be found on our resources page to help you find your marginal tax rate.
The $5,000 income requirement for eligibility was clarified to mean net income for self-employed individuals. The Government of Canada has announced that individuals that claimed CERB in error based on having $5,000 in gross income, may be able to keep their benefits.
You will receive a T4A or T4E tax slip for these benefits, depending on whether you applied through the Canada Revenue Agency or Service Canada.
CRB: Canada Recovery Benefit
The gross CRB benefit was $1,000 per 2-week period
10% tax was withheld at source = $100
Benefits of $900 were paid.
Most people will have a marginal tax rate higher than 10% and will need to be prepared to pay additional tax on these benefits.
There is an income cap of $38,000 for CRB benefits. For every dollar you earned over $38,000, you will need to repay $0.50.
1-Year Tax Payment Extension for COVID-19 Benefit Recipients
Some people that received COVID-19 benefits may not be in a position to pay the tax balance on these amounts by the regular payment deadline of April 30, 2021. If you received certain COVID-19 support benefits and your taxable income in 2020 was less than $75,000 your payment deadline for personal taxes is extended by one year to April 30, 2022.
The COVID-19 financial aid measures include:
CERB: Canada Emergency Response Benefit
CRB: Canada Recovery Benefit
CESB: Canada Emergency Student Benefit
CRCB: Canada Recovery Caregiving Benefit
CRSB: Canada Recovery Sickness Benefit
Employment Insurance *
* Many of us may not realize that employment insurance is considered to be a COVID-19 support benefit and would entitle the recipient to a 1-year tax payment extension.
Tax Tip: The 1-year tax payment extension is for your tax payments only. Your personal tax return must still be filed by the applicable deadline.
In Closing
We understand that these are challenging times for many individuals and families in Edmonton. We are working diligently at Clearly Financials to support our local communities through these unprecedented changes.
Realize that you are not alone, that we are in this together and most importantly that there is hope.
For other COVID-19 resources please view our news blog .
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Disclaimer
This is a summarized version of complex matters that are rapidly changing. The preceding information is provided for general, educational purposes only. Speak with one of our team members if you have any questions about your specific accounting or tax situation.
Clearly Financials offers Smart Accounting and corporate tax services to small businesses in Edmonton, AB. We provide a full suite of services including: Bookkeeping, Payroll, GST filing, Notice to Reader Financial Statements, and Corporate Tax Returns.
We enjoy helping small business owners get setup and hit the ground running. We offer Business Foundation Services which include business plan creation and business structure selection (e.g. to incorporate a business, or operate as a sole-proprietor).
Our Business Performance Management services help small business owners grow their companies, and their profits through goal-setting, budgeting and forecasting.
Our office is located in Old Strathcona in Edmonton, Alberta.
I want to express my gratitude to Tax Consultant Prince George for their unwavering commitment to helping individuals and businesses understand and manage the tax implications of COVID-19. Their guidance has been a lifeline for many during these challenging times.