To help you understand it all, here are a few things it’s good to know about for the tax season.
Taxes on the CERB?
As you may know, the CERB is considered income just like your regular employment income. But unlike regular employment income, income tax was not withheld on the CERB amounts you received. So you can expect to have taxes owing on these benefits.
How much exactly?
The Canada Revenue Agency will determine the amount based on your marginal tax rate (the percentage of taxes to pay based on your income), deductions and other tax credits you are entitled to. If your income for the year is over $13,229, you’ll have to pay taxes. Some accountants prudently suggest putting aside an amount equal to at least 20% of the CERB benefits you received.
Better sooner than later
Dealing with income taxes can always be a bit overwhelming. That’s why we recommend that you file your income tax return as early as possible, before April 30. That way, you’ll have a clear idea of the amount of taxes you’ll need to pay. And, if needed, it’ll then be easier to establish a payment arrangement with the CRA based on your ability to pay. Keep in mind that the CRA imposes a heavy late-filing penalty.
Feeling like you won’t be able to pay?
It’s never an easy situation to be in. But to lend a helping hand to those facing financial difficulties, the Minister of National Revenue announced early in February that individuals who received the CERB and will report taxable income of $75,000 or less will not have to pay interest on any outstanding income tax debt for this year until April 30, 2022. It’s the Canada Revenue Agency itself that will automatically apply the relief measure for individuals who meet these criteria. During these difficult times, it’s a way of supporting those who are struggling to meet their obligations.
