Taxes on bonus pay and the CERB
For anyone who is taking the Canadian Emergency Response Benefit (CERB), you will have to pay tax on that income next year when you file your income taxes.
Why doesn’t the government just take taxes off now?
Because you need money now!
It’s better for you to have money in your pockets now, so you can pay your bills and buy groceries. This has two benefits; the first is that you get to look after your families and yourself, and the second is that you spend that money back into the economy.
To be safe, you should put some money aside for tax time.
How much should I put aside for taxes on the CERB?
Some tax advisors are suggesting that you should save 25% (or one-quarter) of your CERB payments.
($2,000 divided by four is $500)
It is very difficult to say how much exactly you need to save because your income tax for 2020 will be calculated based on your total income for the year. The total income that you make in 2020 will determine what tax bracket you are in, and there is no way of knowing how much you’ll earn by the end of 2020.
What’s a tax bracket?
This is where taxes get confusing, but you’re best to read Canada’s website on tax brackets here:
Tax on Bonuses
First of all, bonuses are always taxed – based on your total income for the year.
If your employer ever gives you a bonus without taking taxes off, that means you have to claim that income at tax time, and you are going to owe your taxes at income tax time.
Taxes are confusing at the best of time. There are a lot of different items that can affect what is and what isn’t taxable income, but we hope this helps to clarify a few things.
Our Union Tax service will be ending on May 8th, so make sure to get your taxes done before then.
People can still file their tax returns up until May 8th.
If you owe money then you will have until September 1st to pay without penalties.