Oct. 30, 2020
Halloween plays an important role in the lives of many tax professionals as it signals there are only two months left for some year-end tax planning.
But year-end tax planning need not be a scary affair if you focus on a couple of tips unique to 2020, one for individuals who received COVID-19 government benefits, and another for persons living with a disability.
The government introduced a number of measures in 2020 to assist individuals who have been affected by COVID-19. Here are some year-end considerations to take into mind if you’ve received any of these benefits this year.
Canada Emergency Response Benefit (CERB)
If you lost your job, were working reduced hours due to the COVID-19 pandemic, or were sick, quarantined or forced to stay home to care for children or other relatives in 2020, the CERB provided income support of $500 per week (or $2,000 per four-week eligibility period) for up to 28 weeks, with a maximum claim of $14,000. The CERB was available until Sept. 26, 2020 and the last date to apply, retroactively, is Dec. 2, 2020.
The government will be issuing you a T4A tax reporting slip for 2020 showing the total amount of CERB you received, and you must report this amount as income when filing your 2020 income tax return. No tax was deducted at source from your CERB payments, so you may need to pay tax on the CERB amounts you received when you file your 2020 income tax return.
The amount of tax that you will owe on your CERB will depend on your 2020 marginal tax rate, taking into account all other income you may have earned in 2020. Before year end, you may wish to estimate your total income from all sources, and estimate any taxes owing, perhaps by using an online Canadian tax calculator, so you can set aside funds to pay the taxes you may owe on the CERB come tax-filing season next April.