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Tax planning and the CERB
Clients will appreciate your help in understanding which government benefits are taxable
l BY RUDY MEZZETTA
clients who received
Covid-19–related government benefits will want their finan- cial advisors to help estimate and manage the tax liability for 2020, tax experts say.
Ottawa paid out billions of dollars of emergency relief with no tax withheld at source, mean- ing clients who fail to account for taxes owing may find themselves scrambling when they file their returns in 2021.
“It’s important for advisors to have this conversation [with clients] now — before the end of the year, as opposed to wait- ing until next spring when they file their return — to determine if money should be set aside,” says Jamie Golombek, managing
director of tax and estate plan- ning with CIBC Private Wealth Management in Toronto.
The Canada Revenue Agency will issue tax slips in February with information about govern- ment benefits received, but “cli- ents will want to know well before then what their taxable income is going to be for the year, so they can plan,” says Jonathan Braun, senior manager, tax and estate planning, with IG Wealth Management in Winnipeg.
As the Covid-19 pandemic caused businesses to go into lockdown earlier this year, the federal government quickly sent out financial aid to people who found themselves out of work. While some benefits — such as
a one-time top-up to old age sec- urity — were given on a tax-free basis, most were sent out on a pretax basis. The biggest of the latter programs was the Canada Emergency Response Benefit (CERB) program, under which Canadians could receive up to $14,000. That program ended Sept. 27, but others, including a simplified employment insurance regime, have been developed to replace it. (See table on page 9.)
How much should your client set aside for next spring’s tax bill? The answer will depend on your client’s taxable income for 2020 and their combined federal/ provincial marginal tax rate — the rate at which tax is calculated on the next dollar of income — in
YOUR GUIDE TO SALES AND FINANCIAL PLANNING
BUILDING YOUR BUSINESS
PAGES 8-16 l INVESTMENT EXECUTIVE l MID-OCTOBER 2020
Special Report
on Taxes
SPECIAL REPORT ON TAXES
U.S. ELECTION CROSS-BORDER TAXES 12 How Biden’s tax policies could affect your clients.
TRUSTS
GET READY FOR 2021 13 New trust reporting rules take effect soon.
BACK TAXES
EXAM TIME 14
CRA audits have resumed.
TAX COURT 14
The TCC attempts to clear delayed cases.
DON’T PANIC
HAND-HOLDING 16
How to set expectations with worried clients.
ALSO INSIDE:
Taxes during a pandemic
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