Canada Revenue Agency Extends 1 Important Deadline for Canadians

Investing in the iShares Canadian Select Dividend Index ETF (TSX:XDV) inside of a TFSA can be a great way to boost your income without incurring a big tax bill.

| More on:
edit Colleagues chat over ketchup chips

Image credit: Photo by CIRA/.CA.

This year’s been a challenging one for many Canadians. The coronavirus pandemic’s crippled businesses and that’s resulted in employers slashing jobs. For some businesses, they’ve shut down entirely. The Canadian government’s doing what it can to help in the meantime by offering a range of benefits for the unemployed, students, and businesses.

The most notable is the Canada Emergency Response Benefit (CERB) which pays Canadians who are out of work due to COVID-19 $2,000/month.

Tax deadline pushed back again

The Canada Revenue Agency (CRA) also pushed back the tax payment deadline earlier this year to September 1 to give taxpayers who owe taxes a bit more breathing room. And in July, the CRA announced that it would again be pushing the tax deadline back — this time to September 30. The deadline is just days before the current end date for the CERB: October 3.

Why next year’s taxes could be a real problem

While the tax extension will help give cash-strapped Canadians a bit more time to pay their taxes, it does nothing to combat a much bigger problem next year. Many Canadians will have big bills to pay, and the reason for that is CERB.

Canadians who receive CERB and aren’t eligible for the payments will have to pay them back. The danger is for those who don’t yet know that they’ll need to pay the benefits back.

With the $2,000/month benefit being extended to cover six months, someone could potentially receive $12,000 that they aren’t eligible for, which could be a big bill to pay come tax time (or sooner). It could make for an already difficult situation for taxpayers that much worse.

And that’s not all. Since CERB is a taxable benefit that’s paid out in gross with no deductions, Canadians will likely have to pay some taxes on it next year, unless they’re in a low enough tax bracket and their tax credits can wipe out any amounts owing.

Now’s the time to save and put money aside into a TFSA

A good way to protect yourself in the event you do have a big tax bill is by putting aside whatever money you can into a Tax-Free Savings Account (TFSA). Even if you’re not sure where to invest the money into, it’s still a safe place to store your money and out of your chequing account so that you avoid spending it.

And if you do want to invest the money, there are plenty of safe options out there. The iShares Canadian Select Dividend Index ETF (TSX:XDV) is an exchange-traded fund (ETF) that’s home to many of the top stocks you can find on the TSX.

Its largest holdings include Canadian Imperial Bank of CommerceCanadian Tire, and Royal Bank of Canada. Nearly 60% of the fund is weighted toward financial services, 12% is in utility stocks and 11% is in communication services.

As the name suggests, you can also generate some recurring income from owning the ETF as it currently yields 5.77%. On a $25,000 investment, that would earn you $1,442.50 in the way of dividend income.

The ETF’s down 17% so far in 2020 but over the long term, it’s likely to rise in value and can be a safe investment to put into your TFSA. And by building up your portfolio and your savings, you’ll be in a much stronger financial position.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned.

More on Investing

Canadian Dollars
Stock Market

Where to Invest $5,000 in April 2024

Do you have some extra cash to spare? Here are five companies to invest $5,000 in next month.

Read more »

Plane on runway, aircraft
Stocks for Beginners

Up 53% From its 52-Week Low, Is Cargojet Stock Still a Buy?

Cargojet (TSX:CJT) stock is up a whopping 53%, nearing closer to 52-week highs from 52-week lows, so what's next for…

Read more »

Question marks in a pile
Bank Stocks

Should You Buy Canadian Western Bank for its 4.8% Dividend Yield?

Down 35% from all-time highs, Canadian Western Bank offers a tasty dividend yield of 4.8%. Is the TSX bank stock…

Read more »

Gold bars
Metals and Mining Stocks

Why Alamos Gold Jumped 7% on Wednesday

Alamos (TSX:AGI) stock and Argonaut Gold (TSX:AR) surged after the companies announced a friendly acquisition for $325 million.

Read more »

tsx today
Stock Market

TSX Today: Why Record-Breaking Rally Could Extend on Thursday, March 28

The main TSX index closed above the 22,000 level for the first time yesterday and remains on track to post…

Read more »

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

3 Growth Stocks I’m Buying in April

These three growth stocks are up in the last year, and that is likely to continue on as we keep…

Read more »