Is CERB Taxable?

start to prepare your tax for 2021 and understand cerb

The beginning of the pandemic may feel like it was ages ago to many of us, but many of us still remember the feelings of panic that washed over us when we realized the ways the public health crisis of our life would make things financially difficult for many of us.


The federal government of Canada’s response to aid, as we all know, was CERB, or the Canadian Emergency Response Benefit. And although this support helped many of us in the days where we really needed it, with tax season right around the corner, many of us are beginning to ask the important questions. At top of mind, of course, is “is CERB taxable?”


Is CERB Taxable?

Yes, CERB is taxable. if you have received CERB, you will be taxed on it. Because the government did not withhold taxes on the payment at the time of deposit, the taxes will need to be deducted during tax season. This difference may be confusing to those who had previously received employment insurance (EI), who would be used to taxes being deducted at the payment source.


How Much Tax Will I Owe On CERB?

Given the period that the benefits lasted for, the maximum CERB amount that Canadians could have received is $12,000 of income. However, the amount of income tax that you will owe cannot be calculated on this number alone. It will instead be calculated based on the total amount that you earned throughout the year.


For example, if you did not have any other income aside from CERB, you likely will not owe a large amount in taxes. This is because Canada uses a progressive tax system that taxes an individual based on their income bracket. This is to say that, if you earned nothing more than $12,000 throughout 2020, you will have very little if any tax liability.


The same cannot be said, however, if you were gainfully employed prior to receiving CERB. If you had a good job and were furloughed and receiving CERB, you may find that you owe a considerable amount on your 2020 tax return. This is especially true if you returned to work after the end of CERB benefits.


What is My Progressive Tax Rate?

It can be confusing to calculate what your personal tax rate is. However, one easy way to determine it that goes beyond speculation is by taking a look at your previous tax return. For most people who are making a lower or middle-class income, your tax rate will range between 15% to 25%. So, it would be safe for most individuals to put aside 20% of their CERB payments.


When Will My CERB Taxes Be Due?

Considering that there has been nothing typical about the year 2020, it makes sense that the year’s tax season would also be far from typical. Although in normal times paying your taxes past the deadline will result in unattractive penalties, it is likely that the deadline for paying your 2020 taxes will be pushed back past its general April date to allow for some time for individuals to file their tax returns. However, this is not yet official, as the government has not revealed any explicit plans to do so.


Can CERB Be Discharged Through Bankruptcy?

If you are facing uncertainty around how you will pay off CERB benefits, there are other options available to you. One possibility is to file for bankruptcy in order to clear debts associated with taxes. Although it is currently unclear whether or not bankruptcy will also effectively clear CERB debts, it is likely that this will be the case.


If you have received CERB money as an error, it is likely that you will be required to pay the CRA. However, full details about what this will look like are not yet available, either.


Allow Genesa CPA to Help With Your Tax Preparation

There is no doubt that this upcoming tax season will be a confusing one for many Canadians. If you have questions about how to file your taxes, Vancouver accounting film is here to address your concerns. Whether you are looking for general tax preparation services, small business tax preparation, or more, we are your go-to experts for tax preparation in BC. Reach out today!