Canada Emergency Response Benefit (CERB) payments, how do they affect your tax return?

The Canadian Government has approved the issuance of an unprecedented amount of benefit payments to individuals, in response the large number of individuals who have unfortunately lost their jobs, as part of the COVID-19 response lockdown. It is important to note, the CERB payments are considered as taxable income, and does not have any income tax deducted at source like regular EI payments. This means that when you file your 2020 tax return, you will be required to pay income tax on the CERB payments received. This could come as a shock, and would be a very unwelcome surprise when filing 2020 tax returns.

It is advised that individuals receiving the CERB payments do their best to try to save some of the funds, as a portion will need to be repaid to CRA when filing the 2020 tax return. The amount that will need to be repaid as tax will depend on the individual’s total income for the tax year. Individuals in a higher tax bracket will be required to repay a larger amount than others in a lower tax bracket. We know it will be difficult to try to save some of the CERB payment, especially with the cost of living and rent, however any amount saved would help in bring down the balance owing at year end.

The due date on balances owing to CRA for the 2020 tax year is April 30, 2021.

First time tax return filers who have mailed their returns to CRA

We have been contacted by first time tax return filers who have mailed their 2019 tax returns to CRA. We have been informed by CRA representatives that they are no longer processing paper returns, in response to departmental closures forced by COVID-19. Unfortunately, this means for many first time tax filers who independently submitted paper tax returns to CRA will be waiting a lot longer than the usual 16-18 week to receive their refund.

However, CRA have not authorized EFILE registered tax return companies to be able to file tax returns online for individuals who have already submitted their returns via mail to CRA. When a tax return is filed online, the refund is usually issued in 2-3 weeks. For individuals who have been laid off due to a shortage of work, a tax refund being issued in a more timely manner could come in handy.

Have you returned home prematurely due to COVID-19 and have still received quarterly GST/HST credit payments?

In the last month, there are people who have unfortunately been forced to return to their home country prematurely due to COVID-19. If you have not updated CRA to let them know that you have moved back home, you will continue to receive the GST/HST credit payments as normal. Unfortunately, if you have exited Canada, you no longer qualify to receive the credit payments, as they are reserved for individuals who are currently tax residents of Canada. If you have been receiving the quarterly payments, CRA will request that the funds be returned to them after they have processed your 2020 tax return, and realize that you ceased to be a Canadian tax resident in early 2020.

It is advised that if you have left Canada, or are planning on leaving Canada soon, that you update CRA once you cease to be a Canadian tax resident.

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