How To File Your Income Taxes If You Received COVID-19 Benefits

Preparing for tax season is never fun, but it’s something we’ve all become accustomed to, and usually, we know what to expect. However, 2020 has been an eventful year due to the COVID-19 pandemic, resulting in mass layoffs, diminished incomes, and people scrambling to find any type of work they can get. To support those impacted by the pandemic, the federal government introduced numerous financial aid packages, which were swiftly distributed to millions of Canadians.

Though most people are grateful for the financial support they’ve received from the government, it also complicates things during tax season, with some wondering how filing a tax return this year will look like.

Here’s what you need to know about filing your taxes when you’ve received COVID-19 government benefits.

Tax Filing Deadlines (2020 Tax Season)

Though it’s been a tumultuous year, with numerous COVID-19 financial aid packages introduced by the federal government, there are no changes to the filing deadlines for the 2020 tax season, nor are there any deadline extensions. You must file your taxes by April 30, 2021. If you’re self-employed, the deadline is June 15, 2021. The earliest date you can file your taxes online is February 22, 2021.

Check out the tax rates for 2021.

Which Covid-19 Benefits Are Taxable?

Before you begin the filing process, ensure you’re aware of which COVID-19 benefits are taxable and how they’re taxed so that you calculate your tax owing correctly. Below is an overview of the taxable government benefits you must report on your return.

Canada Emergency Response Benefit (CERB)

The CERB was implemented to provide financial support to employed and self-employed individuals whose income was affected by COVID-19. An individual must have earned at least $5,000 in 2019 or the 12 months before their application date to qualify.

The maximum payment provided under the program was $500 per week, from March 15, 2020, to September 26, 2020. The maximum amount an individual could receive under the CERB program was $14,000. The program’s conditions permitted recipients to earn additional income while collecting payment, but only up to $1000 per month.

Taxes were not withheld on CERB payments, which means you’ll have to report the full amount as regular income when you file your return. You should set aside about $400 for every $2,000 you received in CERB benefits to settle your tax liability when you file.

Check out what’s replacing the CERB.

Canada Recovery Benefit (CRB)

The CRB gives support to employed and unemployed individuals who don’t qualify for employment insurance. To be eligible, an individual must show that their income over a minimum of two weeks was negatively impacted due to reasons related to COVID-19. Like the CERB, they must have earned an income of at least $5,000 in 2019 or the 12 months prior to applying for the benefit.

The maximum amount a recipient is entitled to collect is $500 per week for up to 38 weeks ($19,000 in total). The payment period runs from September 27, 2020, to September 25, 2021.

CRB payments are withheld at the source at a rate of 10%. Depending on your total income for the year, you may or may not be liable for additional taxes when you file. You’ll have to pay back $0.50 of your CRB income for every dollar you earned above $38,000 during 2020. If your income for 2020 was less than $38,000, you’re not required to pay any extra taxes.

Check out how the tax rates affect the amount of taxes you’ll pay.

Canada Recovery Sickness Benefit (CRSB)

The CRSB provides financial aid to employed and self-employed individuals who can’t work due to an illness or because they’re required to self-isolate due to being in close contact with someone who’s been infected with COVID-19. Those afflicted by a health condition that makes them more susceptible to getting COVID-19 are also eligible for the benefit.

Do you have a disability? You should consider applying for the disability tax credit.

Qualified recipients can receive $500 per week for a maximum period of two weeks. The CRSB benefit is available between September 27, 2020, and September 25, 2021.

CRSB payments are withheld at the source at a rate of 10%. You must include the payments as part of your regular income when you file your return. Depending on your total income for the year, you may have to pay additional taxes when you file.

Check out these tax tips for low income earners.

Canada Recovery Caregiving Benefit (CRCB)

The CRCB provides income support for employed and self-employed individuals who can’t work their full schedule because they must care for a child under 12 years of age or a family member who requires supervised care. Those wishing to apply must show they earned at least $5,000 in 2019 or the 12 months before their application date. Applicants must be at least 15 years and not receiving paid leave from an employer.

Check out these tax credits and benefits for parents.

Qualified individuals are entitled to $500 per week under the program. The payment period runs from September 27, 2021, to September 25, 2021.

CRSB payments are withheld at source at a rate of 10% and must be reported as part of your regular income when you file your taxes.

Did you work from home? Check out these home office expenses you can claim this tax season.

Employment Insurance (EI)

EI provides financial relief for individuals who’ve lost their job through no fault of their own. Though EI has been around for a long time, the COVID-19 pandemic prompted the federal government to relax eligibility criteria and extend the payment period. Instead of accumulating 420 hours of insured work, individuals now only need 120 hours to qualify. The length of time applicants can claim payment is based on their region’s unemployment rate (the higher the unemployment rate, the more weeks of EI they can collect).

Under the revised EI rules, recipients can receive $500 per week for up to 45 weeks (a maximum of $22,500), starting on September 27, 2020. The total number of weeks an individual can claim EI for will vary based on two factors: the unemployment rate in their region at the time of their application and the number of insurable hours they’ve accumulated during the last 52 weeks or since their previous claim, whichever is shorter.

Taxes on EI payments are withheld at the source. You’ll have to include all your EI payments in your taxable income when you file.

Find out which tax receipts you should keep for your income taxes.

Additional Reading

Ways to File Your 2020 Taxes

There are several ways you can file your taxes:

Certified tax software: If you wish to file electronically, you can do so using CRA-approved tax software. The CRA has a tax-filing service called NETFILE, which allows individuals to file their returns online using various tax software products (the CRA website maintains a list of software products compatible with NETFILE). Tax software is usually free for simple, no-frills filings, but there can be fees depending on your needs and preferences. Electronic returns are typically processed in two weeks.

Tax expert: You can hire a tax professional to act on your behalf and file your return. The cost will vary depending on the professional’s expertise and the complexity of your tax return. If you’re not confident in your ability to determine your tax liability, this is an ideal option, but ensure you hire someone you can trust to complete your return correctly. Processing time is typically two weeks.

Community volunteer tax clinic – This is an excellent option for low-income individuals with simple tax returns. A volunteer at a tax clinic can complete your return for you and file it online. The processing time is typically two weeks.

Paper tax return: You can still file your taxes the old-fashioned way if you wish to do so. Complete your return manually and send it off in the mail to the CRA. Not surprisingly, the processing time for paper returns may take up to 12 weeks.

Check out how to file your taxes as a couple in Canada.

Documents You’ll Need to File Your Taxes

Ensure you have a tax slip for each source of taxable income you received during the year. Depending on the type of COVID-19 government benefits you collected during the year, you may have to gather the following documents:

T4 slip: A summary of your employment income and deductions.

T4A slip: A summary of your pension, retirement, annuity, and other income. If you received CRB, CRSB, CRCB, or CERB payments from the CRA, they would appear on this slip as well. Income from provincial and territorial COVID-19 benefits programs will appear on separate T4A slips.

T4E slip: A summary of the gross amount of EI you received and the associated tax deductions. If you received CERB payments from Service Canada, they would appear on this slip as well.

Learn more about the T4 and T4A.

In addition to tax slips, you must also assemble any supporting documents and receipts to validate your income or expenses for the year. For example, if you took on contract work during the year, you must keep detailed records of your income and receipts for costs incurred in the conduct of your work. There are specific forms related to your business activities that you’ll have to fill out and submit to the CRA as well.

These record-keeping rules also apply if you’re an employee who was required to work from home due to COVID-19 – any home office expenses must be adequately documented and accounted for.

Are you self-employed? Check out these tax concerns for self-employed individuals.

Overdue Taxes – Income Tax Relief

If your taxable income for 2020 is less than $75,000, The CRA will waive interest charges on any overdue taxes resulting from federal COVID-19 benefit payments until April 30, 2022.

If you owe a substantial amount of taxes on federal COVID-19 benefit programs, you can ask the CRA to arrange payment in settlements between now and April 2022.

Learn what you should do if you owe money to the CRA.

Final Thoughts

Though the 2020 tax season is more likely to be fraught with confusion and frustration than those before it, you can easily navigate the process by following a few steps:

Take stock of the different types of income you received during the year.
Find out which income is taxable and whether taxes were deducted at the source.
Gather all supporting documents to substantiate each income source, and do the same for any legitimate expenses as well.

By taking some time out of your day to conduct your research and prepare your paperwork, you won’t be left scratching your head when you file your taxes.

Mark Gregorski

Mark is a writer who specializes in writing content for companies in the financial services industry. He has written articles about personal finance, mortgages, and real estate and is passionate about educating people on how to make smart financial decisions. Mark graduated from the Northern Alberta Institute of Technology with a degree in finance and has more than ten years' experience as an accountant. Outside of writing, he enjoys playing poker, going to the gym, composing music, and learning about digital marketing.