You, the CERB and taxes
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.
Your financial well-being is worsening? There are solutions available.
Even if you feel like you’re backed into a corner, there’s always hope. To help you see the light at the end of the tunnel, here are three ways for you to take back control.
- First, consider submitting a request for taxpayer relief. In some cases, it can cancel late filing penalties and interest of 5% that are normally imposed by the Canada Revenue Agency. A tax expert could help you prepare the request.
- Because your finances shouldn’t keep you awake at night, you can also think about filing a consumer proposal. It’s a practical way to protect yourself from your creditors while negotiating a reduction in a large portion of your debt, including taxes.
- As a last resort, it’s possible to declare bankruptcy. This option makes it possible, in the vast majority of cases, to completely get rid of tax debt and free yourself from a financial burden that weighs too heavy on your shoulders. Keep in mind that you won’t have to do it alone; support is available.
To sum up
If the tax season is stressing you out financially, book an appointment online with one of our counsellors. They have the expertise needed to help you see things more clearly. And to help you get back your peace of mind!
Meet with one of our counsellors for free
You just have to take this one step to reestablish your financial health. You’ll get out of debt and gain a better quality of life. That’s the Raymond Chabot effect.