During 2020, the government of Canada implemented a number of programs to help support Canadians. As a result, many Canadians will have received a T4A slip for the various benefits they received. This slip will show the amount of benefits you received from the various programs and must be reported on your 2020 Income Tax Return.
The tax consequences of this will differ from one program to the other.
The first two pandemic programs that were introduced to support Canadians were CERB (Canada Emergency Response Benefit) and CESB (Canada Emergency Student Benefit).
CERB was a 28 week program that ran from March until September. Eligible applicants were entitled to $500 per week for up to 28 weeks. If you claimed the maximum benefits, this means you would have received $14,000.
CESB was a similar program available to post-secondary students. Under CESB, students received $1,250 every 4 weeks for up to 16 weeks. Though some students received more if they were disabled or had dependents.
Unfortunately, no tax was deducted from payments made under either of these programs.
The last three pandemic programs were CRB (Canada Recovery Benefit), CRCB (Canada Recovery Caregiving Benefit) and CRSB (Canada Recovery Sickness Benefit). These programs replaced CERB and CESB when they ended in September.
Each of these three programs offered $500 per week for various time periods. CRB could be claimed for up to 26 weeks as an income replacement.
CRCB was also paid out at $500 per week. Canadians could claim this benefit if they had to stay home with a child under 12 or other dependent due to closures at schools and care facilities for at least 50% of the week. CRCB was also available to taxpayers who had to stay home because a child or family member was sick, required to quarantine or high risk.
CRSB was a special benefit that was available to Canadians that were sick or in quarantine and couldn’t work. Eligible recipients received $500 per week for up to 2 weeks.
CRB, CRCB and CRSB differ from the original emergency benefits because tax was deducted from these payments at a rate of 10%.
So what does this mean for taxpayers?
As a general rule, you can expect to pay 15% federally and 5.05% provincially (if you live in Ontario) on the income received from CERB and CESB.
For the remaining 3 programs, you will have to pay approximately 5% federally and 5.05% provincially. The federal amount is less thanks to the 10% taken off at the source.
If you made over $48,536 in 2020, the rates you pay will be higher.
If this will leave you with financial difficulties, don’t panic. The government realizes that the financial hardships of COVID continue and that making a lump sum payment is difficult. As such, the Canada Revenue Agency may offer special payment arrangements. The government is also providing interest relief on taxes that are paid late, so long as your income was less than $75,000 in 2020.
And don’t forget! If you worked from home you can also benefit from claiming eligible home office expenses.
For more information on the pandemic benefits and how they’ll affect your after tax position, contact us today.
