CRA tax tips for the self-employed

In a release on Wednesday, the Canada Revenue Agency (CRA) offered tax tips for the self-employed who received Covid-19 benefits.

First up was a reminder that Covid-19 benefits are taxable income, including the:

• Canada Emergency Response Benefit (CERB),
• Canada Emergency Student Benefit (CESB),
• Canada Recovery Benefit (CRB),
• Canada Recovery Sickness Benefit (CRSB), and
• Canada Recovery Caregiving Benefit (CRCB).

“These benefit payments are not considered self-employment income,” the CRA said in the release.

Tax may be owed depending on personal circumstances and the type of Covid benefits received.

“If you received the CERB or CESB, no tax was withheld when payments were issued, and you may owe tax when filing your 2020 tax return,” the release said.

While 10% tax was withheld at source for the CRB, CRSB and CRCB, “when you complete your personal income tax return, you may need to pay more (or less) depending on how much income you earned in 2020,” it said.

The CRA also noted the importance of filing on time to avoid interruption of Covid benefit payments, such as CRB, CRSB and CRCB.

Other federal, provincial or territorial support received must also be reported, including the Canada Emergency Wage Subsidy, the temporary 10% wage subsidy and the Canada Emergency Rent Subsidy.

These are taxable and will be either included in business income or, if you elect, will reduce your business expenses, the release said.

For self-employed people who received the Canada Emergency Business Account loan, “the loan itself is not taxable,” the release said. However, “any part of the loan that is forgivable is taxable in the year in which the loan is received.”

As previously announced, taxpayers who have filed their 2020 returns won’t be required to pay interest on any outstanding income tax debt for the 2020 tax year until April 30, 2022, as long as they had $75,000 or less in total taxable income in 2020 and received Covid-19 income support (those supports listed above as well as employment insurance benefits or provincial emergency income benefits).

“The CRA will automatically apply the interest relief measure for individuals who meet these criteria,” the release said.

The CRA also noted that self-employed taxpayers who applied for CERB and would have qualified based on their gross income won’t be required to repay the benefit, provided they met all other eligibility requirements.

“Some qualifying self-employed individuals whose net self-employment income was less than $5,000 may have already voluntarily repaid the CERB,” the release said. “The CRA and Service Canada will return any repaid amounts to impacted individuals.”

For more information on personal income tax and Covid benefits, visit the CRA website.