Is CERB taxable? The Ultimate Guide to CERB Tax

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Danielle Kubes is a trained journalist and investor who has written about personal finance for the past six years. Her writing has been published in The Globe and Mail, National Post, MoneySense, Vice and RateHub.ca. Danielle writes about investing and personal finance for Wealthsimple. She has a Bachelor of Humanities from Carleton University and a Master of Journalism from Ryerson University.

In March 2020, the government of Canada instituted the Canadian Emergency Response Benefit (CERB) to help residents make ends meet during the Covid-19 pandemic. Roughly 8.5 million Canadians collected the $2,000 monthly CERB payments that year before the program closed in September.

When the program started, the government advised Canadians that they should be withholding tax from the benefit, as they would need to pay income tax on it later. Those who received CERB income had to add it to any other taxable income and pay taxes at their marginal rate when they filed for 2020. The government advised that people save 20% of the total for taxes, or $400 a month, so as not to fall short of their obligation to the Canada Revenue Agency (CRA).

This tax liability meant that CERB recipients’ net income wasn’t as high in 2020 as they may have expected.

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How much tax CERB recipients have to pay

CERB was taxable at the same rate as recipients’ total taxable income from employment and interest. They needed to add CERB income to their income tax return at both state and federal levels. The following were the federal tax rates for 2020 according to the CRA:

  • 15% on the first $48,535 of taxable income, and…

  • 20.5% on the portion of taxable income over $48,535 up to $97,069 and…

  • 26% on the portion of taxable income over $97,069 up to $150,473 and…

  • 29% on the portion of taxable income over $150,473 up to $214,368 and…

  • 33% of taxable income over $214,368

Why government benefits are taxed

Taxing CERB is consistent with the way that other government benefits are taxed, such as employment insurance (EI) and Old Age Security (OAS). But the government does this, in theory, in order to be fair to each individual’s circumstance. If CERB was your only income all year, for example, then it’s unlikely you would be paying anything at all to the CRA since your income may fall under the personal exemption amount. But if CERB was only a small portion of your income, along with interest income, dividend income, and a big death benefit in 2020, for example, then you may have ended up paying back over half.

Since eligibility criteria for CERB was restricted to low employment or self-employment income, you were still allowed to earn money from investments and from some other sources.

When CERB taxes are due

Those who received CERB funds had to pay tax whenever they prepared their normal 2020 taxes. The deadline for paying taxes owed was normally April 30, 2021, though an extension is always possible. Additionally, the CRA provided taxpayers who earned less than $75,000 in 2020 an automatic extension on interest accrual until April 30, 2022.

What happens if you haven’t set aside taxes for CERB

If you didn’t set aside taxes for CERB, and you found that you owed a significant amount, then you would still have had to pay taxes.

Is CERB Taxable FAQ

The CERB, which was dispensed to eligible Canadians between March and September of 2020, provided $2,000 per month to recipients. Those who received the funds were expected to add the amount to their income at tax time and pay their marginal tax rate on the total income amount. For those whose only income was CERB that year, they probably did not owe tax on the income, as their income fell under the personal exemption threshold. For those who had lots of income aside from CERB, the tax rate was comparable to the tax they paid on other income. The government recommended that the average recipient would want to save around 20% of the CERB income, or $400 a month, to pay the CRA in April 2021.

When the Covid-19 pandemic began, the Canadian government acted very quickly to provide relief to Canadians who had lost income as a result. Administrators created the CERB program rapidly and began dispersing funds right away without requiring proof of eligibility, deciding to collect that documentation later in the interest of getting money into people’s pockets immediately. Eventually, the government sent letters to many CERB recipients asking them to prove their eligibility, or to return the CERB funds if they could not. In December 2020, Prime Minister Justin Trudeau said close to a million CERB recipients who didn’t qualify had already sent the money back.

Those who needed to repay their CERB money had three options for doing so:

  1. Via the CRA website

  2. Via online banking with their financial institution by adding CRA as a payee

  3. Via mail, by cheque or money order made payable to “Receiver General for Canada.” The cheque had to indicate “Repayment of CERB,” which eligibility period the repayment was for, and the taxpayer’s social insurance number (SIN) or temporary tax number (TTN). Payment had to be mailed to Revenue Processing—Repayment of CERB, Sudbury Tax Centre, 1050 Notre Dame Avenue, Sudbury ON P3A 0C3.

CERB ended on September 26, 2020. At that point, the government continued to provide income support to those who had received CERB via temporary changes to the employment insurance (EI) program designed to help more people qualify. Some of those receiving CERB were automatically enrolled in EI on September 27, while others had to apply. Those who were eligible began receiving a maximum of $573 per week for up to 45 weeks. The government also put the Canada Recovery Benefit (CRB) in place to help those who weren’t eligible for EI.

CERB stands for Canadian Emergency Response Benefit.

Recipients included CERB income on their 2020 tax returns by adding the amount they had received from the program to their annual income total. They then had to apply their own marginal income tax rate to the entire amount, which included the CERB income. In this manner, CERB recipients were able to claim CERB on their taxes and pay the appropriate amount to the CRA for the 2020 tax year.

Those who had qualified for the CERB program and may have started receiving funds from it may have decided later on that they either did not need the CERB funds, stopped being eligible for them after a time, or were never actually qualified for them in the first place. Someone in this position would have wanted to cancel their CERB application or claim in order to stop the flow of funding to their account.

Those who wanted to cancel because of a mistake regarding eligibility would need to return money they were not entitled to, sending it back to the CRA via the methods described above.

When CERB ended, the immediate replacement for people’s income was provided by temporary changes to the Employment Insurance (EI) program. Those who had received CERB via Service Canada were automatically registered in EI on September 27, 2020. Those who had received CERB via the CRA had to apply for EI. Those who were qualified for EI then started to receive a maximum of $573 per week for up to 45 weeks.

Meanwhile, in October 2020, the CRA launched the Canada Recovery Benefit (CRB) to help those whose employment was directly affected by COVID-19 and who were not entitled to receive EI benefits. Depending on when someone applied, the CRB provided either $1,000 or $600, with 10% withheld for taxes, resulting in payments of either $900 or $540 for a two-week period.

Many CERB recipients were able to receive assistance from the EI program, and those who couldn’t were able to apply for the Canada Recovery Benefit (CRB) that was launched directly after CERB to help those who didn’t qualify for EI benefits.

Last Updated March 28, 2022

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