CERB, CEWS, and CRB: How COVID Benefits Are Taxed

Key takeaways

• CERB, CRB, CRSB, and CRCB payments are all taxable income reported on T4A slips
• No income tax was withheld at source on most COVID benefit payments — many recipients owed tax at filing
• CERB repaid before December 31, 2020 could be deducted in 2020; repaid in 2021 deducted in 2021
• CRA offered repayment arrangements for those who owed taxes on benefits
• Provinces and territories had their own benefit programs — check your T4A for all amounts

The speed at which the federal government rolled out COVID-19 emergency benefits in 2020 was unprecedented — and it came with a tax consequence that caught many recipients off guard. The Canada Emergency Response Benefit (CERB), the Canada Emergency Wage Subsidy (CEWS, received by employers), and the successor programs that followed were all taxable income. But unlike employment income, most were paid without any withholding tax.

Which benefits are taxable

The Canada Emergency Response Benefit (CERB) — paid at $500/week for up to 28 weeks — is fully taxable. It appears on a T4A slip in box 197. If you received CERB through Service Canada (as EI-CERB), it appears on a T4E slip.

The Canada Recovery Benefit (CRB), which replaced CERB from September 2020, is also taxable — reported on a T4A in box 202. The CRB had a 10% withholding tax, but for recipients in higher tax brackets, this was insufficient. The Canada Recovery Sickness Benefit (CRSB, box 203) and Canada Recovery Caregiving Benefit (CRCB, box 204) are taxable with the same 10% withholding.

The Canada Emergency Student Benefit (CESB) is taxable, reported in box 198. Provincial benefit programs — such as Ontario's COVID-19 Support Grant — are also taxable and should appear on your provincial T4A or equivalent.

How much tax you might owe

CERB paid $500/week. Annualized over 28 weeks, that is $14,000. For a recipient with no other income, most of that falls below the Basic Personal Amount ($13,229 for 2020) — so the tax owing might be small. But for someone who worked for part of the year and then collected CERB, the combined income could push them into the 20.5% federal bracket, with provincial tax on top.

The CRB had 10% withholding. If your combined income including CRB puts you in a 30% marginal rate bracket, you likely owe an additional 20% on the benefit amount. On $10,000 of CRB, that is $2,000 additional tax owing at filing time.

Repayment and deductions

Some Canadians were determined to have received CERB incorrectly — because they did not meet the income threshold, were still employed, or applied for both the CERB and EI. The CRA issued notices requesting repayment.

Repayment of COVID benefits reduces your taxable income for the year in which the repayment is made. If you received CERB in 2020 and repaid it before December 31, 2020, you deduct it on your 2020 return (box 201 on Schedule 1). If you repaid in 2021, you can deduct it on your 2021 return. You cannot amend a prior-year return to claim the deduction in the year the benefit was received.

CRA collections and payment arrangements

The CRA confirmed that Canadians who owed tax on COVID benefits could apply for payment arrangements — spreading the debt over a period of months — without penalty, provided they filed their return on time and contacted the CRA. Interest would still accrue on amounts owing after April 30, 2021, but the CRA indicated flexibility for COVID-related hardship cases.

If you received a T4A from the CRA and believe the amount is incorrect, contact the CRA at 1-800-959-8281. Do not simply ignore the amount on your return — unreported T4A income will almost certainly be flagged in the CRA's automated matching program.