The Canada Revenue Agency (CRA) has opened the application window for the October 25 to November 7 Canada Recovery Benefit (CRB). Have you claimed the benefit for the first two periods? If yes, then consider these three things before applying for the third period of CRB.
This year, the CRA gave out several cash benefits in the wake of the COVID-19 pandemic. Before the CRB, the CRA gave up to $14,000 in Canada Emergency Response Benefit (CERB) payments. Both CERB and CRB are taxable.
The CRA can take away your CRB
The CRA can also take back the CRB:
- If your 2020 annual income exceeds $37,000, or
- If you refuse a decent work opportunity.
The first thing to check before applying for the third period of CRB is your expected annual income for this year. While calculating this income, add the $14,000 CERB payment or any other taxable COVID-19 benefit you claimed like Canada Recovery Sickness Benefit (CRSB) and Canada Recovery Caregiving Benefit (CRCB).
If your income adds up to more than $37,000, don’t apply for the CRB. Because the CRA will take away 50% of the surplus income up to the CRB amount you collected. For instance, Rose earned $42,000 in 2020 and collected $1,800 in CRB last month. The CRA will take away the entire CRB amount ($5,000*50% = $2,500) when Rose files her 2020 tax returns in April 2020.
She will lose out on two out of the 13 periods of CRB and won’t even get the benefit amount as the CRA will take it away.
You could be left with no cash in April 2021
The second thing to check before applying for CRB is the probability of getting a job in April. The CRB is in place until September 25, 2021. But every eligible person can claim CRB only for 13 periods or 26 weeks. If you have a job and you are able to meet your expenses, save the CRB for the difficult times.
If you keep claiming the CRB consecutively, it will exhaust in the first week of April when you will have your 2020 tax bill. In the event you are still jobless, you could experience a no cash April as many experienced a no cash October due to CRB delays.
You can also claim a retrospective CRB within 60 days from the opening of the application window for that period. If you have sufficient cash and you are still eligible for the third period of CRB, you can apply for this $900 benefit any time before January 8, 2021.
See if you qualify for other benefits
The CRA has launched two more COVID-19 benefits — CRCB and CRSB. If you are sick or have been tested COVID-19 positive, you can claim a two-week CRSB of $900. The only condition is your employer should not reimburse you for the same. You can also claim care giving benefits. These benefits are for those who are working.
If you are above 65 years of age and have an annual income of over $37,000, you can claim your Old Age Security (OAS) pension and Guaranteed Income Supplement (GIS). The CRA doesn’t claw back OAS until your income exceeds $77,580.
A better benefit than CRB
Claim CRA cash benefits strategically to make the most of it, or the agency might take it back. There is something better than CRB. It is a life-long benefit you can get irrespective of your age or income and the CRA can’t take it away. This benefit is called passive income from your Tax-Free Savings Account (TFSA), which makes withdrawals tax-free.
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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 Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Smart REIT.