CERB is taxable – here’s how to calculate taxes on the benefit

Canadians who benefited from the CERB financial aid will need to review the total amount they’ve received and prepare to pay taxes, financial experts advise.

The Canada Emergency Response Benefit served as a safety net for Canadians who faced economic hardship in the early months of the COVID-19 pandemic. But one detail of the program that is rarely highlighted is the fact that the CERB is a taxable benefit.

While income tax was not deducted upon payment of the CERB, the cash assistance will have to be reported when beneficiaries file their 2020 income tax return. Otherwise, they could be left with an unexpectedly high tax debt.

Read more: Can’t repay CERB before Dec 31? Don’t fret! – CRA

The Canada Revenue Agency (CRA) will issue beneficiaries a T4A slip detailing the financial aid they’ve received. Anyone who owes the agency money – for having claimed the CERB by mistake – will have to repay that amount before Dec. 31 to avoid receiving the tax slip unnecessarily.

“The tax amount you will have to pay will depend on your total income for the year,” advises Douglas Hoyes of the debt relief specialist Hoyes Michalos. “If you were on CERB for most of the year and your income was low, your tax liability will not be large.”

Any CERB recipient who was on the program for a full 28 weeks – the maximum period allowed by the government – would have received $14,000 in total.

The amount would likely translate to a minimal income tax due since Canadians can earn up to $13,229 per year, as part of their basic personal amount, without having to remit income taxes.

Read more: 200K+ Canadians may have to return CERB payments

But it can get complicated for people who were employed sometime before or after receiving the CERB. “If, however, you had a good job prior to COVID-19 and returned to work quickly, you could be facing a larger-than-expected tax bill, as opposed to your typical refund,” Hoyes says.

To get a rough sketch of how much taxes CERB recipients possibly owe, they will have to calculate how much they earned from their job before and after the CERB and add those to the total amount of CERB benefits they received. Beneficiaries can use this CERB tax calculator.

Overall, the amount of tax they will have to pay depends largely on their total income and their federal tax bracket for the year.

The CRA welcomes requests from CERB recipients to formulate a tax payment scheme for them if they find it difficult to remit income taxes for 2020.