By Farhana Uddin and the Sun Life team
Did you receive CERB or other government benefits last year due to the pandemic? Here’s what your taxes might look like and how to pay less.
Have you been sick or unemployed due to the COVID-19 pandemic? Have you received financial aid from the government? If so, you may have to report them or repay some of them when you file your taxes.
Here is a summary of benefits, taxable and non-taxable, related to COVID-19.
Do I have to pay tax on the CERB?
Last year, sick, confined or unable to work were eligible for the Canada Emergency Response Benefit (CERB). This benefit could reach $2,000 per month and be spread over a maximum of four months. This year, these citizens will have to pay tax on the CERB. Why? Because the money received is part of the taxable income.
How much can the CERB tax be?
You should know that there was no withholding tax on the PCU. A withholding tax is an amount automatically deducted and paid to the government.
If you have a permanent job, tax is probably taken from your salary before receiving it. So you don’t have to pay too much tax when you file your tax return.
But in the case of the CERB, since there is no withholding, you may have to pay more tax. Possibly more than the government would have withheld at source. The exact amount depends on your tax bracket, determined by your income for the previous year (which includes the CERB).
Tax slip: If you received the CERB in 2020, the Canada Revenue Agency (CRA) would send you a T4A. The title will show the amount received, and you will need to report it in your income.
Do I have to pay employment insurance (EI) tax?
After ending the CERB in September 2020, the government replaced it with a new EI program. Those eligible received at least $400 per week for up to 28 weeks (about six months).
EI, like CERB, is considered taxable income. You will therefore have to declare it.
But the difference is that the government has already withheld tax from the EI payments. So you may not have to pay so much tax when you file your return.
Tax slip: The CRA will send you a T4E for EI. The title will show the amount you received in EI.
Do I have to pay tax on the Canada Recovery Sickness Benefit (CRSB)?
Thanks to the PCMRE, eligible workers can receive $500 for one week. And it is possible to request the benefit a second time.
The PCMRE is a taxable income that is partially taxed at the source. This means that the CRA withholds 10% from the benefit before you receive it. Depending on your total income and your local tax rate, you may have to pay more tax.
Tax Slip: You will receive a T4A showing how much PCMRE you received.
Do I have to pay tax on the Canada Recovery Caregiver Benefit (CRCB)?
The PCREPA is for people who are not working because they care for a relative because of COVID-19. This benefit is $500 per household per week. It can be spread over a maximum of six months.
Again, this is taxable income, partially taxed at source, because the CRA withholds 10% before payment. Depending on your total income and tax bracket, you may have to pay additional tax.
Tax slip: You will receive a T4A showing how much you received from PCREPA.
4 Important Tax Credits for Caregivers
Do I have to pay tax on the Canada Emergency Student Benefit (CESB)?
Last year, post-secondary students and high school and post-secondary graduates could apply for the CESB. This benefit of $1,250 per month was spread over 16 weeks, from May 10 to August 29, 2020. Claimants could obtain an additional $750 per month if they had a disability or dependents.
This benefit is also considered taxable income. Therefore, you will have to pay tax when you file your return because there was no deduction.
Tax slip: You will receive a T4A showing how much CESB you received.
Do I have to pay tax on the Canada Recovery Benefit (CRB)?
PCRE assists self-employed individuals who are not eligible for EI. It rises to
$1,000 per two-week period. You can, however, make new requests over six months of eligibility.
The CRA considers PCRE as taxable income and withholds 10% at the source. This means that you will receive in reality.
