Situations arose forcing us to change our working behaviour, such as being in self-isolation or quarantine due to COVID-19, making even the strongest feel uncertain about what it all means in terms of taxes. As well if it changes how we prepare / file them.  As far as what has been communicated, there are no specific tax rules or changes related to being under self-isolation or being asked to quarantine, with respect to Covid.

Whether you are a salaried or hourly employee or self-employed, you will have questions because of this situation.

Did you stop working or work less during 2020?

The federal government introduced some new measures to assist those that have had to stop working or have been laid off.

Canada Emergency Response Benefit (CERB):  CERB provided a taxable benefit of $2,000 per month to qualifying individuals; who lost their income as a result of the COVID-19 pandemic or earned less than $1,000 in a 4 week period.  CERB was discontinued on Sep 26th, 2020 to be replaced with CRB.

Canada Recovery Benefit (CRB):  CRB came into effect on Sep 27th, 2020 and had similar eligibility criteria as CERB. Although with CRB, it is a taxable benefit and the CRA deducts 10% tax at source, which you can claim as a refundable credit on your tax return.

When you have a decrease in your income, this means that your taxable income is going down.  

Your taxable income determines what rate of tax is used to calculate how much tax you might owe.  Less employment income will usually mean less taxable income and that will be indicated on your T4 slip.

If you applied for CERB or CRB, the benefit would be added to your income, which would increase your tax liability. The CERB and CRB  income is reported on your T4A slip. The CRA will withhold 10% taxes from your CRB earnings and none from your CERB. This does not cover the first federal and provincial tax bracket. You should consider saving some money on the side, in case you are required to pay taxes when you file your 2020 income tax return.

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