How your taxes could be impacted by the COVID-19 pandemic
This year’s tax season is unique and could also be very confusing, especially with several measures introduced by the government to assist those who had to stop working or have been laid off.
Though most benefits are taxable, many weren’t taxed at the source (meaning the government didn’t hold back an amount of money to go towards your taxes), so that money will be calculated and owed when you do taxes this year. To help you prepare your taxes, here are some insights from Lisa Gittens, senior tax expert from H&R Block:
For those who received the Canada Emergency Response Benefit, the government will be issuing a tax reporting slip for 2020 outlining the total amount of funds received. This must be reported as income on 2020 returns, and since no tax was deducted at the source, dues may need to be paid on these amounts. The amount owed will depend on your 2020 marginal tax rate, taking into account all other income earned that year. Your marginal tax rate is the amount of tax you would pay on an additional dollar of income and is based on the rates of tax applied to a given level of income, both federally and provincially.
If you are self-employed without a paid sick leave program, you may be eligible for the Canada Recovery Sickness Benefit, which provides $500 per week for up to two weeks if you were unable to work due to illness or were required to self-isolate. This benefit is available from September 27, 2020 to September 25, 2021. The deadline for applying for any one-week period is 60 days after the end of that period. Tax is withheld at the source for the benefit so any amount received through the CRSB is taxable.
If you have had to miss work to care for a family member due to COVID-19, you may be eligible for the Canada Recovery Caregiving Benefit. This benefit is also available from September 27, 2020 to September 25, 2021. As with the CERB and the CRSB, the CRCB is taxable and subject to a 10 per cent withholding tax.
If you are concerned about preparing your own return, an H&R Block tax expert can give you added confidence and peace of mind.
– News Canada