Some Canadians who received CERB may be surprised by tax bill
TORONTO -- The federal government paid out more than $80 billion through the Canada Emergency Response Benefit (CERB) to almost nine million Canadians last year.
Now, some are surprised to find out they may have to pay a portion of that money back.
“A lot of people are finding themselves in a situation this year where they are owing a lot more money to the government than in previous years," said Josee Cabral, senior tax specialist with H & R Block.
Cabral said she was advising her clients to put away $400 for every $2,000 in CERB payments they received to help out at tax time, but many people didn't or couldn't during the pandemic.
A tax clinic in Toronto that prepares tax returns for free said many people who use their services were unaware that CERB and other government benefits were considered taxable income.
In one example, a woman who was used to receiving a refund of $400 at tax time will now have to pay about $800 to the government after accepting CERB benefits.
“No matter what amount they received from CERB, there was no income tax withheld at the source so it is a taxable amount," Cabral said.
Other government benefits for students and caregivers could also result in a tax hit.
“A lot of people didn't plan for this or set aside money for taxes that are already owing," said Aurele Courcelles, who works in tax and estate planning at IG Wealth Management.
Courcelles said some Canadians may have also received benefits they weren't eligible for that will need to be repaid.
“Now they are preparing their tax returns for 2020 with a tax bill that they may have never experienced before," said Courcelles.
However, there is some relief as the government recently announced if you owe money this tax season you will have longer to pay it back.
The government has extended the deadline to pay your taxes, with no added interest, until April 30, 2022 if your taxable income doesn't exceed $75,000.
Cabral said if possible, pay it back as soon as you can.
“I don't recommend for people to just put it aside. It's money they will end up owing one way or the other so if you can go and make payments throughout the year I would try to do that,” she said.
It’s advisable to get your taxes done before the deadline of April 30 this year and to try and file them online. Anyone filing a paper tax return could see delays as long as three months to have it processed due to COVID-19.