For the 2020 income tax year, many Canadians may find themselves owing personal income taxes for the first time due to the Canadian Emergency Response Benefit (CERB) and other government income support benefits.
If you received the CERB or another government benefit such as the Canadian Emergency Student Benefit (CESB), you may or may not have been aware that the benefit was taxable income and that the Canada Revenue Agency (CRA) and Service Canada did not deduct income tax when they paid you the money. Since the government did not tax these benefits at source, you have not yet contributed to your 2020 income taxes for that source of income and must pay what is owed.
How Much Will I Owe on My Income Taxes Because of CERB?
The amount of income taxes you will owe for the 2020 filing year will depend on a number of factors. Since the CERB, CESB and other pandemic-related income support benefits are only part of your income tax return, you will not know how much you owe the CRA until you have filed your 2020 income taxes.
To determine the amount of income tax owed, you need to take into consideration your total income in 2020 from all sources and any deductions and credits you are eligible to claim. Your total income will include the amount of CERB, or other government benefits you received, as well as any income you earned before, during, or after you received the government benefits in 2020.
Once you know your total income for 2020 and the deductions and credits you are eligible for, you can then use the income tax rates set out by the federal government and your provincial government to figure out the amount you owe, if any. There are many income tax calculators available online that will help you get a rough idea of what you might owe.
If you are concerned about how much income tax you may owe, the best thing you can do is properly file your income taxes. We recommend getting help from a professional tax preparer who may be able to help reduce the amount you owe the CRA using tax deductions and credits that you may be unaware of.
An important thing to note is that for the 2020 filing year, the CRA has announced it will provide targeted interest relief for those who owe income taxes due to a government income support benefit. Learn more about the CRA’s targeted interest relief program and its eligibility.
If you think you may owe income taxes for reasons other than a CERB or other government income support benefit, learn more about the common ways people acquire income tax debt.
To learn about the options available for paying back income tax debt check out: