Skip to main content

Taxes and Canadian Emergency Response Benefit

 
Find out what you need to know about paying taxes on CERB

 
April 30, 2020  3 minute read

If you’ve received a CERB payment to help you manage during this pandemic, you probably heaved a sigh of relief. The government made it a priority to get these payments to the individuals who need them as quickly and simply as possible. However, there are some important tax implications to keep in mind.

What is the CERB? 

The CERB is a government program which provides a taxable benefit of $2,000 every 4 weeks for up to 16 weeks to eligible workers who have lost their income due to COVID-19. 

Is the CERB taxed at source?

No, the CERB is what is known as a gross payment. That means no tax has been withheld at source for the Canada Revenue Agency. The onus is on you to put aside enough money to pay the associated tax when income taxes are due.

What are you paying taxes on?

If you’ve received CERB payments, your full tax bill will be calculated on your income to date, the CERB, and expected future income. If your tax has already been withheld on your earlier income and will be withheld on future income, you just need to set aside enough money for the tax related to the CERB. 

How do you calculate how much to save?

Pinpointing an accurate number is difficult, but looking at how the CRA handles RRSP withdrawals helps give a ballpark estimate. Based on that example, if you receive the full $8,000 CERB, try to set aside 20%, or $200 on each $1,000. If you have had a high income to date, then use 30% to account for the higher marginal tax rate on further income.

At a 20% rate on the $8,000 total, you should save $1,600 as a buffer for taxes. At a 30% rate, target $2,400

How can you keep yourself on track for these savings?

Avoid any nasty surprises at tax time by creating a separate savings account. You can put in the amount you need to save from each payment as soon as it arrives. Having this money out of easy reach will help you remember not to dip into it. 

How can you open a savings account?

It’s easy! Here’s how:

  • Log in to online banking
  • Under Account Services, choose “Open a new Account”
  • Click on “Savings accounts”
  • Enter your information

We’ll do the rest! To set up an account over the phone, you can visit cccu.ca to book an Everyday Banking appointment or call 1.888.741.1010. One of our experts will be happy to help.

We’re committed to sharing helpful and timely information to support you and our communities during the COVID-19 pandemic. If there’s a topic you would like us to explore, please email communications@cccu.ca

Connect with Coastal Community


We're here for you.