The Canada Emergency Response Benefit (CERB) is over, but the Canadian government is still helping Canadians who are out of work as a result of the coronavirus pandemic. For CERB recipients who don’t transition onto the Employment Insurance (EI) system, many of them will be eligible for the new Canadian Recovery Benefit (CRB). Initially, the benefit was only going to pay Canadians $400/week, putting millions in a worse position than under CERB. However, the government has increased that tally up to $500/week so that the new benefit will be paying eligible recipients the same amount as CERB did.
But there’s one important thing that Canadians need to remember about the new CRB, and that’s that it remains taxable. Just like the CERB, you’ll need to include these payments on your 2020 tax return when you file taxes next year. And that’s not something recipients should be neglecting. The more in CERB and CRB and other income that you receive this year, the more likely it is that you’ll have to pay at least some taxes for 2020.
The higher that your income gets, the less likely it’ll be that tax credits will be able to offset the taxes that you’ll owe. It’s no different than if you received thousands of dollars of income from an employer and discovered that they didn’t deduct taxes. You’d potentially be in a difficult situation of having to pay tax on all that income. And for Canadians who may already be stretched to their limits due to the pandemic, the last thing they’ll want to discover next year is that they owe taxes.
What should CRB and CERB recipients do?
The one thing you can do to avoid a shock in a few months is to try and estimate how much in taxes you’ll owe. It’s not an easy exercise to do on your own, but even just by using last year’s tax software, you can enter in the income you’ve earned thus far and add any CERB benefits plus the benefits you expect to receive for the remainder of the year. That should give you a great idea of how much tax you might owe and if you need to start setting some money aside, or if your income is low enough that you won’t have to worry about it.
And if you do need to set some money aside, a good option may be to put some money into a low-volatility dividend stock like BCE (TSX:BCE)(NYSE:BCE). The telecom giant is a great investment whether you’re holding money for the short or long term. Year to date, it’s fallen 8% and around just 2% in the past six months. The Quebec-based business pays an attractive dividend yield of 6% per year. And so, even if its stock doesn’t move much, you can still generate some additional dividend income along the way.
But BCE stock has seen strong support at around $55 (outside of the March market crash), and there’s not a whole lot of risk with buying the stock today. Unless there’s another crash, the stock likely won’t full much further from where it is today.
With strong and consistent profits and the company being a leader in its industry, BCE is one of the better long-term investments you can buy on the TSX. Regardless of if you may need to pay taxes next year, putting whatever you can in shares of BCE can be a great way to save for retirement and build up your savings.
