COVID-19 income assistance could cost Canadians at tax time, experts say

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A lifeline for many during the pandemic can prove to be a nightmare for some at tax time.According to the Government of Canada, 27.56 million requests for the Canadian Emergency Response Benefit (CERB) have been processed and more than $ 81.64 billion have been paid to nearly 9 million claimants as of October 4 .

Tax experts from CH Financial Ltd, a Calgary-based financial advisory group, told Global News that some of these Canadians might be surprised to learn that government financial aid they have received is taxable.

“It’s all income fully taxable and tax has to be paid,” CEO Jeremy Clark said.

Clark said depending on people’s jobs and income over the year, they could face a huge tax bill.

“The CERB, there is no tax withheld,” he added. “So you could potentially have two or three sources of income and not enough tax withheld. ”

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“So there could be hundreds – even thousands of dollars – in taxes to pay.”

Read more:

Your CERB money is taxable. This is how it will work

It was certainly something longtime Calgary musician Michael Hope envisioned when he applied to CERB.

Hope is Assistant Principal Bassoonist of the Calgary Philharmonic. He said the year started to roll around mid-March as the Calgary Phil got ready for a concert.

“Between the rehearsal and the concert, we all got an email saying the concert had been canceled and all concerts for the foreseeable future would be canceled,” he said.

He asked for federal help a few months later to help make ends meet.

“It would have been very difficult without it,” he said. “I would have succeeded, but hardly.”

Calgary musician grateful for income assistance during pandemic.


CTSY: Michael Hope


Hope said he also received a lot of help from his employer and supporters in the community. And now that smaller virtual gigs are underway, he hopes he won’t have to ask for federal help.

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He’s been able to save some of the money that’s coming in now, so he doesn’t get hit by 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 support yourself in the here and now, then that’s not really a choice.”

Read more:

Do you have a double CERB payment? Here is what to do

How to avoid – or pay off – a huge tax bill

Clark said Global News is struggling to do that, that those who receive income assistance of any kind have to set aside some of that money. He suggested 15 to 20 percent, but added that any amount would be enough.

“It’s always a good idea to save part of a paycheck,” he says. “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 5% – just in a rainy day fund, I think it’s still a good all level of income. ”

For those who couldn’t say anything, Clark said it was not too late to start now.

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What’s essential, he says, is that you pay what you can as soon as you get the bill.

“Even if it’s a few hundred dollars, I suggest you pay that,” he says.

“And then the interest will start to accrue on the rest. But if you don’t pay anything, you could end up in a penalty situation.

Clark also said there is one more thing to consider when it comes to taxes this year, and that is what you can and cannot deduct from your work-from-home expenses.

He expects these expenses to play a big part in your taxes as well as millions of Canadians continue to work remotely.

© 2020 Global News, a division of Corus Entertainment Inc.



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