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

As of Friday, Alberta has under 10,000 active COVID-19 cases. (Image courtesy CDC)
Three new COVID-19 deaths in Central zone, Alberta under 10,000 active cases

The Central zone sits at 849 active cases, with 52 people in hospital and 10 in the ICU.

Alberta’s chief medical officer of health Dr. Deena Hinshaw announced 16 additional deaths Thursday. (Photo by Chris Schwarz/Government of Alberta)
No easing of Alberta’s COVID-19 measures Thursday, 678 new COVID-19 cases

The province also hit 1,500 COVID-19 deaths since the beginning of the pandemic

Dean Olsen Missing Poster
Blackfalds RCMP seek public assistance to locate missing male

Dean Olsen was last seen on Jan. 20 in Red Deer County

Alberta Premier Jason Kenney said the Canadian government should consider sanctions on the U.S. if they refuse to reconsider the decision to cancel the Keystone XL Pipeline. (THE CANADIAN PRESS/Sean Kilpatrick
Keystone XL officially cancelled, Kenney vows to fight on

U.S. President Joe Biden cancelled the presidential permit for the pipeline on first day of office

Alberta’s chief medical officer of health Dr. Deena Hinshaw said province’s test positivity rate for COVID-19 is steadily declining. (Photo by Chris Schwarz/Government of Alberta)
669 new COVID-19 cases in Alberta, 21 additional deaths

COVID-19 test positivity rate down to 4.5 per cent

Alberta’s chief medical officer of health, Dr. Deena Hinshaw, updates media on the COVID-19 situation in Edmonton, Friday, March 20, 2020. Hinshaw says residents in long-term care and supportive living facilities will remain the priority as the province grapples with a looming slowdown in COVID-19 vaccine supply. THE CANADIAN PRESS/Jason Franson
Alberta long-term care residents remain priority in looming slowdown of COVID vaccine

There are 119 patients in intensive care and 1,463 people have died

FILE - In this Feb. 14, 2017, file photo, Oklahoma State Rep. Justin Humphrey prepares to speak at the State Capitol in Oklahoma City. A mythical, ape-like creature that has captured the imagination of adventurers for decades has now become the target of Rep. Justin Humphrey. Humphrey, a Republican House member has introduced a bill that would create a Bigfoot hunting season, He says issuing a state hunting license and tag could help boost tourism. (Steve Gooch/The Oklahoman via AP, File)
Oklahoma lawmaker proposes ‘Bigfoot’ hunting season

A Republican House member has introduced a bill that would create a Bigfoot hunting season

FILE - In this Nov. 20, 2017, file photo, Larry King attends the 45th International Emmy Awards at the New York Hilton, in New York. Former CNN talk show host King has been hospitalized with COVID-19 for more than a week, the news channel reported Saturday, Jan. 2, 2021. CNN reported the 87-year-old King contracted the coronavirus and was undergoing treatment at Cedars-Sinai Medical Center in Los Angeles. (Photo by Andy Kropa/Invision/AP, File)
Larry King, broadcasting giant for half-century, dies at 87

King conducted an estimated 50,000 on-air interviews

Black Press File Photo
Maskwacis RCMP lay charges for attempted murder, kidnapping, and flight from police

Female victim remains in hospital in serious condition.

In this Dec. 18, 2020 photo, pipes to be used for the Keystone XL pipeline are stored in a field near Dorchester, Neb.  THE CANADIAN PRESS/AP-Chris Machian /Omaha World-Herald via AP
‘Gut punch’: Alberta Premier Jason Kenney blasts Biden on revoked Keystone XL permit

Kenney said he was upset the U.S. wouldn’t consult with Canada first before acting

Joe Biden, then the U.S. vice-president, and Prime Minister Justin Trudeau take their seats at the start of the First Ministers and National Indigenous Leaders meeting in Ottawa, Friday, Dec. 9, 2016. THE CANADIAN PRESS/Adrian Wyld
Trudeau, Biden to talk today as death of Keystone XL reverberates in Canada

President Joe Biden opposed the Keystone XL expansion as vice-president under Barack Obama

Prince Edward Island’s provincial flag flies on a flag pole in Ottawa, Friday July 3, 2020. A lozenge plant in Prince Edward Island has laid off 30 workers, citing an “almost non-existent” cold and cough season amid COVID-19 restrictions. THE CANADIAN PRESS/Adrian Wyld
‘Almost non-existent’ cold and cough season: P.E.I. lozenge plant lays off 30 workers

The apparent drop in winter colds across the country seems to have weakened demand for medicine and natural remedies

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 Calgary flight

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

Most Read