The impact of ECP on your taxes

Taxes on the CRB?

The CRB replaced the Canada Emergency Response Benefit (CERB) and ended in October 2021. As you may know, it is considered income just like your regular employment income, which means it is taxable. But unlike the CERB, the CRB was subject to source deductions. The gross amount was $1,000, which means 10% or $100 was deducted at source as taxes. You therefore received a net amount of $900 per period. However, the 10% tax you paid may not be sufficient. You may have to pay more (or less), depending on your personal tax situation.

How much exactly?

If you earned more than $38,000 during the calendar year:

• You will have to repay some or all of the benefit when preparing your tax return.
• You will have to repay $0.50 of the CRB for every dollar of income earned over $38,000 on your tax return. You will not have to repay more than the benefit amount received during the year.
• For example, if your net income for 2021 is $40,000 (without the CRB), you are $2,000 over the $38,000 threshold. You will therefore have to repay $0.50 for every dollar of the $2,000 excess, which means you have to repay $1,000.

You will receive a T4A slip from the Canada Revenue Agency showing the amount of CERB you received.

Sooner rather than later

Dealing with income taxes is always a bit overwhelming. That’s why we recommend that you file your income tax return as early as possible before May 2, 2022. That way, payment of your benefits and credits will not be interrupted and you’ll have a clear idea of the amount of taxes you’ll need to pay. Keep in mind that the CRA imposes a heavy late-filing penalty (the penalty is 5% of your balance due for 2021).

Feeling like you won’t be able to pay?

It’s never an easy situation to be in. If you have tax debts and don’t have the means to pay them in one payment, there are options. Among others, you can make an agreement with the CRA on a payment schedule that aligns with your ability to pay. For more information, refer to our article on tax debts. During these difficult times, it’s good to know there are solutions to help those who are struggling to meet their obligations.

Your financial well-being is worsening? There are solutions available.

Even if you feel like you’re backed into a corner, there’s always hope. To help you see the light at the end of the tunnel, here are three ways for you to take back control.

1. First, consider submitting a request for taxpayer relief. In some cases, it can cancel late filing penalties and interest of 5% that are normally imposed by the Canada Revenue Agency. A tax expert could help you prepare the request.
2. Because your finances shouldn’t keep you awake at night, you can also think about filing a consumer proposal. It’s a practical way to protect yourself from your creditors while negotiating a reduction in a large portion of your debt, including taxes.
3. As a last resort, it’s possible to declare bankruptcy. This option makes it possible, in the vast majority of cases, to completely get rid of tax debt and free yourself from a financial burden that weighs too heavy on your shoulders. Keep in mind that you won’t have to do it alone; support is available.