How might COVID-19 benefits impact tax filing?

Beginning in 2020, the Government of Canada has been introducing COVID-19 benefits aimed at helping Canadians and businesses facing hardship as a result of the pandemic. Through the end of 2021, more than 2 million Canadians have applied for and received these benefits.¹

If you, your family or your business collected benefits over the course of 2021, you may have to report and file taxes in an unprecedented way.

Below is a brief summary of key benefits as of January 31, 2022. As the benefits continue to evolve, it is important to refer to the Government of Canada website for the most complete and up-to-date information. Additional provincial benefits may also be available and for more details on specific COVID-19 provincial benefits, refer to your provincial finance department resource website.

1. Individuals and families:

• Canada Emergency Response Benefit (CERB): CERB provided financial support to employed and self-employed individuals. These benefits concluded September 2020 and were not applicable in 2021.
• Canada Emergency Student Benefit (CESB): CESB provided financial support for students unable to access the CERB or EI benefits. These benefits concluded August 2020 and were not applicable in 2021.
• Canada Recovery Benefit (CRB): CRB provided financial support to employed and self-employed individuals who were not entitled to Employment Insurance benefits. Eligibility started September 2020 and closed December 2021. CRB payments have a 10% withholding at source and recipients will receive a T4A slip, to report the CRB benefits received.
• Employment Insurance (EI): EI benefits were enhanced to provide greater flexibility and support to Canadians. Taxes are withheld on EI benefit payments as required by the Income Tax Act at the source and recipients will receive a T4E slip to report the benefits received.
• Canada Recovery Caregiving Benefit (CRCB): CRCB provides support to employed and self-employed individuals that need to care for a child under the age of 12 or a family member that needs supervised care. The time period for eligibility is from September 2020 to May 2022. CRCB payments have a 10% withholding at source and recipients will receive a T4A slip to report the CRCB benefits received.
• Canada Recovery Sickness Benefit (CRSB): CRSB provides financial support to employed and self-employed individuals that are unable to work because of COVID-19. The period of eligibility is from September 2020 to May 2022. CRSB payments have a 10% withholding at source and recipients will receive a T4A slip to report the CRSB benefits received.
• Canada Worker Lockdown Benefit (CWLB): CWLB provides temporary financial support to employed and self-employed individuals who cannot work due to a COVID-19 lockdown in a designated region, meeting specific requirements. The time period for eligibility is from October 2021 to May 2022. CWLB payments have a 10% withholding at source and recipients will receive a T4A slip to report the CWLB benefits received.

How do I report benefits as taxable income?

If you received CRB, EI, CRCB, CRSB or CWLB in 2021, you’ll receive a T4A or T4E slip from CRA that provides the amount to report as taxable income to make filing easier. Depending on your total earnings, you may have to pay additional tax, or you may get a refund. Unlike other taxable income, the government benefits may not qualify as earned income for RRSP room purposes.

2. Small business owners and self-employed individuals:

• Canadian Emergency Wage Subsidy (CEWS): Wage subsidies were available to eligible employers and business owners that continued to pay employees and met the reduction in revenue threshold requirements. CEWS would have been applied for and paid to the business and is taxable in the corporate year on the last day of the claim period applied for. CEWS benefits are taxable to the business, but will be typically offset by the wages paid to employees. The period of eligibility for the CEWS benefits was from March 2020 to October 2021.

With the conclusion of the CEWS benefit eligibility period, additional and more specific benefits have been introduced as follows:

• Tourism and Hospitality Recovery Program (THRP)
• Hardest-Hit Business Recovery Program (HHBRP)
• Canada Recovery Hiring Program (CRHP)

For more specific details, please refer to the Government of Canada website.

• Canada Emergency Business Account (CEBA): The $40,000 CEBA loan program was introduced in 2020 and was expanded in 2021 by $20,000 for a total of up to $60,000. Almost 900,000 Canadian businesses applied for CEBA, and over 570,000 applied for the expansion². This program provides impacted businesses and non-profits with an interest-free loan until December 31, 2023, of which up to $20,000 is forgivable, if certain requirements are met. The forgiven portion of the loan is taxable.
• Canada Emergency Rent Subsidy (CERS): Business, non-profits and charities that were renting real property from an arm’s length party to conduct their businesses and were impacted by the pandemic may have been eligible to collect rent subsidies for the period from September 2020 to October 2021. In October 2021, this program was replaced by:

• Tourism and Hospitality Recovery Program (THRP)
• Hardest-Hit Business Recovery Program (HHBRP)

The noted rent subsidies can be applied for with the same application as the respective wage subsidies.

Next steps

If you received COVID-19 benefits talk to your advisor about how they may impact your financial strategy.