A Taxing Situation, Make Sure To Report It

This week, travel law experts, Doug Crozier and Tim Law of Heifetz, Crozier, Law respond to to a travel agent’s question about the Canadian Emergency Response Benefit (CERB).

Q: I’ve applied for CERB, and have gotten my first payment.  Is it taxable?

A: Yes.  According to https://www.canada.ca/en/services/benefits/ei/cerb-application/questions.html#self-employed-independent-workers: “The Benefit is taxable — you will be expected to report it as income when you file your income tax for the 2020 tax year.”

Note that (unlike the case with EI payments) the Government is making no at-source withholding for your ultimate Income Tax obligation.  Instead, you enjoy the immediate use of 100% of the CERB for which you qualify, which maxes out at $500 per week for sixteen weeks.  But there will be a day of reckoning, when tax on those payments will fall due.

How much tax will be payable will vary, because it is a function of both:

• The marginal rate you pay (i.e. in which of the graduated tax brackets you are).

The province in which you live (as each province adds its own tax to the federal rate applicable to all).
By way of broad generalization based on 2020 rates, on the first $48,535 of taxable income, Canadians will pay federal tax at a marginal rate of 15%, while the marginal rate rises to 26% on incomes exceeding $150,473.  A quick look at https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html will help you to determine the provincial rate applicable to you.  Within the broad parameters that result, you can perhaps guesstimate how much of the CERB will be repayable to Ottawa in April of 2021.

If you have a question, you can contact Crozier or Law at info@hclaw.com or connect with Bob Mowat at Canadian Travel Press/Baxter Media at bobmowat@baxter.net.

Heifetz, Crozier, Law is a Toronto law firm that has for years represented all aspects of the Canadian travel industry. The lawyers at HCL also maintain a non-travel practice, covering litigation, real estate, Wills, corporate/commercial matters, etc. To contact HCL, e-mail info@hclaw.com.