Tax Talk: The tax implications of COVID-19 relief programs

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Chances are, with everything going on, taxes aren’t exactly top of mind right now. This likely goes for both individuals and business owners. And while the 2019 filing deadline has been extended, it’s never too early to start thinking about your 2020 return—especially if you are one of the millions of Canadians who have received financial relief because of COVID-19.

Which program(s) you’re eligible for will change based on your unique situation, but there are a few things to keep in mind when it comes to taxes that apply to everyone. We spoke with chartered accountant, Bill Marr, to help provide some insight.

Personal taxes

The Canada Emergency Response Benefit (CERB) was created to provide financial support for individuals who have stopped working because of COVID-19. Under this program, individuals receive $500/week for up to 16 weeks. This is considered taxable income. But how much you’ll have to pay back come tax time depends entirely on how much your income is for all of 2020.

“The government did a really good job of rolling out programs to quickly get cash into the hands of those who needed it the most,” says Bill. “If you’re out of work, you need money to live so it might not be realistic to be setting money aside to account for taxes right now. But keep in mind, at some point over the course of 2020—hopefully when you’re back to work and making more money—you will need to think about that.”

Income tax rates vary according to the amount of income you earn and you can pay different rates on different portions of your income. In general, the more you make, the more taxes you can expect to pay.

It’s always a good idea to make—and stick to—a budget. Especially when you know you might have to set a little extra aside for the future.

Business taxes

When it comes to businesses, there are a variety of programs available for businesses of all sizes. And while the details of each program vary greatly, there is one common thing to keep in mind when it comes to taxes: You can only be taxed on revenue.

“Many of the business programs are designed to help with expenses,” says Bill. “Say, for instance, you had a restaurant that had to shut down. Maybe you had expenses totalling $750 and you’ve received government funding for $750. The funding pays for the expense, but you’ve still not made any money. And if you’re not making any profit, there’s nothing to be taxed,” he says.

It can be tough to navigate the many programs available and to know which one might be right for you. But Bill’s ultimate advice? “If you qualify for a program, I suggest you take advantage of the opportunity. Many of these programs are designed to keep cash flowing to help our economy and are there to help you when you need it. Atlantic Canadians are resilient—especially small business owners.”

In need of some advice of your own? Check out this list of available COVID-19 government relief programs or contact your local credit union.