The Federal government recently announced the CERB, Canada Emergency Response Benefit, to provide income assistance to Canadians during this unprecedented time. Unlike your regular paycheque though, income tax will not be withheld by the government.
What does this mean?
A year from now, when you file your 2020 income tax return you will owe income tax on these CERB payments yet no income tax will have been withheld. After one of the most difficult times our economy and its citizens have had to bear in recent memory, you will likely have a tax burden. During this difficult time, you probably need every cent of the CERB payments to meet your monthly obligations. If you are not able to put away a portion towards income tax right now, plan ahead so that when things return to normal, you can begin to save that income tax amount.
Many clients have asked how much to put away. The answer depends on how much other income you will earn during the year. To make the answer a simple one, we suggest saving 30% of the payments for income tax; for some it may be too much but it will then be returned via a tax refund.
Surprises at tax time are not the happy kind (well unless you are getting a refund); additional stress because you were unprepared can be avoided or minimized.
Please stay safe; take care of our community by keeping your family, friends and teams healthy by physical distancing.
Please reach out if you have any questions, Sharon@CalgarysChoiceTaxServices.com
Let us worry about your taxes, so you don’t have to!