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A lifeline for many during the pandemic could prove to be a nightmare for some at tax time.
According to the Government of Canada, 27.56 million Canada Emergency Response Benefit (CERB) applications have been processed with over $ 81.64 billion paid to nearly 9 million applicants as of October 4.
Tax experts from CH Financial Ltd, a Calgary-based financial advisory group, told Global News that some of those Canadians might be surprised to learn that the government financial aid they have received is taxable.
“It’s all taxable income and taxes have to be paid,” said CEO Jeremy Clark.
Clark said that depending on the occupation and income people have had during the year, they could face a huge tax burden.
“The CERB, there are no tax withholdings,” he added. “So you could potentially have two or three sources of income and not withheld enough.”
“So there could be hundreds – or thousands of dollars – in taxes due.”
Read more:
Your CERB money is taxable. Here’s how it will work
It was definitely something that longtime Calgary musician Michael Hope took into consideration when applying for the CERB.
Hope is principal assistant bassoonist at the Calgary Philharmonic. He said the year began to crumble around mid-March as the Calgary Phil was preparing for a concert.
“Between rehearsals and the concert, we all received an email saying the concert had been canceled and that all concerts for the foreseeable future would be canceled,” he said.
A couple of months later he applied for federal aid to make ends meet.
“It would have been very difficult without it,” he said. “I would have done it, but barely.”
Calgary musician grateful for income aid during a pandemic.
CTSY: Michael Hope
Hope said she also received a lot of help from her employer and community supporters. And now that little virtual concerts are underway, he hopes he won’t have to apply for federal aid anymore.
He’s been able to save some of the money that comes in now, so he won’t get hit with a huge tax bill later, but he knows not everyone can.
“If you don’t have the money and you need it to feed your family and keep yourself in the here-and-now, then it’s not a great choice.”
Read more:
Do you have a double CERB payment? Here’s what to do
How to avoid – or pay back – a huge tax bill
Clark told Global News that it’s hard as it may be, those who get any kind of income aid have to put some of that money away. He suggested 15 to 20 percent, but added any amount.
“It’s always a good idea to save some paycheck,” he said. “I know times are tough right now, certainly in Alberta for a variety of reasons, but I think to save a little – even 10 or five percent – just in a rainy day bottom, I think is always good advice for people of any income level. “
For those who haven’t been able to express themselves, Clark said it’s not too late to start now.
What’s vital, he said, is that you pay what you can as soon as you get the bill.
“Even if it’s a couple of hundred dollars, I’d suggest you pay for it,” he said.
“And then interest will start to accrue on the rest. But if you pay nothing, you could end up in a penalty situation. “
Clark also said there’s one more thing to consider when it comes to taxes this year, and that’s what you can and can’t claim from your home business expenses.
It is expected that these expenses will also play a huge role in your taxes as millions of Canadians continue to work remotely.
© 2020 Global News, a division of Corus Entertainment Inc.
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