How CERB May Affect your Tax Return

Millions of Canadians found themselves financially distraught amid the COVID-19 pandemic. Fortunately, the Canadian government came through in a big way with the Canadian Emergency Response Benefit.

CERB provided the financial relief consumers needed, but come tax time, you may owe more money than you thought because of the benefit. Depending on your financial situation, you may even have to pay back CERB, or a portion of it.

What is CERB?

CERB is benefits from the federal government between March 15, 2020, and October 3, 2020, to supplement your income.

The government sent out $500 per week to eligible applicants and each applicant could receive payments for up to 16 weeks. The benefits were available to anyone over the age of 15 who could not work due to COVID-19.

Eligible applicants were those who earned at least $5,000 in 2019 and who lost their job due to circumstances outside their control. Eligible applicants could not make more than $1,000 a day for 14 consecutive days for their initial application. For any future claims, applicants could not earn more than $1,000 for the previous four weeks.

Taxes on CERB

The federal government didn’t take taxes out of the CERB money, giving applicants access to the full $2,000 monthly payment. But, the payments came with a warning. All recipients must claim the income on their taxes, which could increase their tax liability at tax time.

Taxpayers must add their CERB payments (up to $8,000), to their other income from 2020. This includes any income earned before COVID started and any money earned once the economy came back to life.

On average, taxpayers pay between 20% to 54% depending on the federal tax bracket they fall in and the provincial tax brackets based on where you live.

Reasons you may have to Repay CERB

In some cases, Canadians have to repay CERB. It’s not common, but if any of the following apply, you must repay the benefit but you can claim it as a deduction on your 2021 taxes.

  • You received more than one benefit at a time. If you received the Canada Recovery Benefit, Canada Emergency Student Benefit, Canada Recovering Caregiver Benefit, or Canada Recovery Sickness Benefit, you must pay one benefit back.
  • You received benefits from CRA and Service Canada. Many people were eligible for benefits from both and may have applied to both hoping to get at least one. If you received both, one must be paid back.
  • You earned more than $1,000 during a time you received CERB. If you worked and made more than $1,000, you must repay the CERB you received for that period.

Know How CERB Affects your Taxes

Before you file your taxes, consult with a tax advisor about the potential increase your CERB benefits will cause on your tax return. If you owe money, it’s important to know before you file your taxes. For example, if you received $8,000 (the total benefit) and are in a 20% tax bracket, you may owe $1,600.