Mar 8, 2022
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If you’re one of the many Canadians who relied on the Canada Recovery Benefit (CRB) between 2020 and 2021, you may be wondering about what happens come tax time.
CRB provided those who couldn’t claim employment insurance, but had still lost out on at least 50% of their wages due to COVID, with financial support, totalling more than $28 billion between September 2020 and October 2021.
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But unlike its predecessor, the Canada Emergency Response Benefit (CERB), with CRB, the federal government decided to withhold 10% in tax upfront. While that means many won’t have to worry about settling a tax debt this spring, others may still be in for an unwelcome surprise when they do their taxes.
That’s because the government’s income limit means it’ll be clawing back some of that money from Canadians who earned more than $38,000 in 2021.
Many recipients need not worry about additional taxes
The decision to withhold taxes from CRB payments means many will avoid last year’s confusion when it comes time to file their taxes. Of course, it also meant applicants received less support upfront.
Depending on their situation, instead of getting a $1,000 or $600 payment every two weeks, CRB recipients got $900 or $540. For most, that clawback will take care of their tax liability.
And in fact, for some who earned little else other than their CRB payments in 2021, once they file their taxes, they’ll receive some of that withheld money back through a tax refund.
But a small number of taxpayers whose earnings may have been inconsistent throughout the year could expect to owe the government some money. If you earned more than $38,000 net for the year, you’re going to have to repay 50 cents on every dollar of net income over that threshold.
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That $38,000 limit, however, excludes any CRB benefits you received as well as payments from a registered disability plan or money from the Canada Child Benefit and GST/HST credit.
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How to know if you owe more taxes
If you did have other sources of income, it’s likely you’re going to owe some money back.
For those who received CRB benefits in 2020, come tax time, the Canada Revenue Agency (CRA) will issue you a T4A (or RL-1 for Quebec residents) again this year. If you only started claiming CRB in 2021, once tax time approaches, you should receive your form in your CRA My Account.
The government has a federal worksheet designed to help taxpayers calculate how much they will owe.
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But don’t panic if the worksheet shows you’ll have a big tax bill. Other items may reduce your tax liability, like Registered Retirement Savings Plan (RRSP) contributions, charitable donations, childcare fees, capital losses or home office expenses.
If you made similar contributions or expect to make the same deductions for 2021, you can flip back to your 2020 paperwork to get a sense of how much you’ll be able to reduce your tax liability.
For those still facing a large bill even after those deductions, keep in mind that the CRA will work with you to set up a realistic payment plan. Before you reach out to the agency, it suggests crunching some numbers first. Once you’ve nailed down your monthly income and expenses, you can use its payment calculator to figure out what you can realistically afford each month.
From there, you’ll have to contact the CRA to get a payment plan set up.
Finally, it’s important to note the CRA is not going to ask you to repay more than you received in benefits over the year. That means if you got $3,600 from CRB, you’ll only owe back $1,800 — whether you earned $45,000 or $100,000 over the year.
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Sigrid’s is Money.ca's associate editor, and she has also worked as a reporter and staff writer on the Money.ca team.
