With tax season just around the corner, you may be concerned about the impact various government assistance programs may have on your tax return.
We have broken it down for you so that there are no surprises when completing your tax return.
These payments did not have tax deducted from them and will need to be reported on your personal tax return.
Simplified Employment Insurance Program
EI benefits are taxable and tax is withheld at source.
Canada Recovery Benefit (CRB)
The CRB is taxable and 10 % is withheld at source.
Canada Recovery Sickness Benefit
The CRSB is taxable and 10 % is withheld at source.
Canada Recovery Caregiving Benefit
The CRCB is taxable and 10 % is withheld at source.
So how much tax will I owe?
To properly determine the 2020 tax you will owe on your government benefits in April, you would need to know what your total 2020 income will be, which can be very hard to gauge during this time of income uncertainty.
A starting point would be to add your pre-pandemic income to your estimated total taxable COVID-19 benefits. You can then use an online tax calculator to estimate the taxes owing on your income with and without the government benefits. If you find that any tax that was withheld is less than the tax owing on the benefits, you may want to set aside the difference for April’s tax payment.
We recommend that you read our blog, 5 Things to consider when filing your tax return, for additional tax advice.
Source: Canada Revenue Agency