Tax season in Canada is almost upon us and it is only going to be made more confusing because of COVID-19 (of course!). If you collected any of the COVID-19 benefits in 2020, you might be surprised to find that instead of receiving a refund, you owe taxes. It is especially important this year to begin you tax return early so you can assess what amount, if any, you will owe due to receiving these government benefits.
The Government of Canada was very clear at the start that the Canada Emergency Response Benefit (CERB) and the Canada Emergency Student Benefit (CESB) would be a taxable benefit as no taxes were deducted at the time of issue.
The Canada Recovery Sickness Benefit (CRSB) and Canada Recovery Caregiver Benefit (CRCB) had 10% tax withheld at the source so depending on your total income for 2020, you may need to pay more tax or, if your income was at the lower end, you may be due a refund.
Canada Recovery Benefit (CRB) all had 10% tax withheld at source, same as the CRSB and CRCB. However, if you had other income totaling more than $38,000 in 2020 you will have to reimburse $0.50 of the CRB for every dollar of the net income above $38,000 (excluding the Canada Recovery Benefit).
The Government of Canada will be issuing a T4 slip for the 2020 tax year, which you should receive before March 10, 2021, make sure you check your mailbox as well as your inbox on My Account for Individuals on CRA website. Additionally, if you applied for COVID-19 benefits through Service Canada, you will be receiving a T4E slip instead of a T4 slip. You will want to ensure that you keep this slip for up to 6 years as part of your records.
If you claimed any COVID-19 benefits and have now realized that you are not eligible, there is still time to report this to CRA to mitigate an audit risk. We at Jason Ding, CPA Inc are well versed in the Covid19 relief plans and can assist you in navigating through this process.
This can all be slightly confusing and complex, especially as you may have initially received Canada Emergency Response Benefit and then were transitioned to Canada Recovery Benefit, both of which have different tax implications. Jason Ding, CPA Inc. are here to help assist you through filing your taxes during these complicated and uncertain times. If you would like us to complete your 2020 Personal Tax return, please contact us.