You’ll have to include any benefits in your total income for this year
By April 7—the second day on which one could do so—1.5 million Canadians had applied for the Canadian Emergency Response Benefit (CERB), the federal government’s relief initiative to help workers affected by the COVID-19 pandemic crisis. By Easter Monday, more than five million Canadians had received emergency aid.
The benefit provides those who have found themselves suddenly unemployed—and who are not already receiving Employment Income (EI) benefits—with up to $2,000 a month: $500 a week for up to four months. That could amount to $8,000.
What many may not realize is that the benefit is taxable, and the government isn’t withholding taxes. That means recipients will have to declare the amount they receive as taxable income in April 2021, and that could leave them with a tax bill that—depending on their total income for 2020—could amount to hundreds or even thousands of dollars.
The prudent course of action for anyone receiving CERB payments is to put a percentage of that money aside—in a savings account or, if he or she has contribution room, in a Tax-Free Savings Account (TFSA)—so as to be able to pay the tax bill that he or she will face next year.
Of course, many of those who desperately need those CERB payments could spend every penny making ends meet during the crisis. But if they don’t plan ahead, they need to know that they could face a financial crunch come tax time next year.
If you know someone receiving CERB benefits, it would be a kindness to alert him or her to the fact that he or she may have to pay tax on that income.