When the pandemic started, the livelihood of millions of people was affected. Several people lost their jobs outright, and businesses started closing. Many people who retained their jobs saw pay cuts and reduced hours. Others were furloughed and had to wait to be recalled for the job. This widespread economic displacement was why the CERB was introduced.
The $2,000 a month benefit was enough to keep people going. But the problem is that the CERB was too general in nature. It was hard to keep track of, and the government couldn’t differentiate between the recipients and their need/legitimacy with great accuracy. This is why, as things settled down and the economy re-opened a bit, the government eliminated the CERB and introduced a new range of COVID benefits.
Here are two of the payments:
The CRSB
CRA introduced the Canada Recovery Sickness Benefit (CRSB) to help individuals who are sick, self-isolating because of COVID, or have a higher-than-normal danger of getting sick. A person who isn’t already receiving other benefit payments (the CRB, EI, CRCB, or short-term disability benefit) and falls under the sickness benefit eligibility criteria can apply for the $450 (after taxes) payment for one-week.
If the situation remains the same, they can apply for another one-week period. For now, the payment is available for just two weeks.
The CEWS
If you run a business and you need the government’s help in continuing your payroll because your business income is getting decimated by the pandemic, then the CEWS is the benefit payment for you. The Canada Emergency Wage Subsidy (CEWS) was introduced so that businesses don’t have to lay off their employees because revenues were dropping. If people are paid at the source, they won’t overburden other benefit systems.
Businesses (individuals, partnerships, corporations) with CRA payroll accounts (exceptions exist) that experienced a drop in revenue, and they generate revenue from an eligible source that is qualified for CEWS benefits.
The TFSA payment
If your COVID relief payments are coming out of your own Tax-Free Savings Account (TFSA), they are not taxable like the benefit payments from the CRA. And if your TFSA isn’t helping you out because it’s either empty or full of just emergency cash, then it might be high-time that you put it to good use. An aristocrat like Exchange Income Fund (TSX: EIF) can a good place to start.
The company is offering a juicy 6.7% yield. If you can divert about half of a fully stocked TFSA to this stock ($35,000), you might be able to create a monthly dividend-based income of $195. It’s not comparable to the benefit the government is offering, but it won’t increase your tax burden, and unlike the benefits, it will continue and hopefully increase in the future.
The company has been increasing its dividends for nine consecutive years. It hit a rough patch in the pandemic, mostly because of its dependence on the air travel industry. But it’s recovering, and the stock is following.
Foolish takeaway
While benefits are helpful when you are in a tight spot, don’t forget the tax liability associated with them. Whether it’s the CRB, CRCB, or the CRSB payments (which are partially taxed at the source), they are still taxable income, and based on your tax rate; you may need to pay the difference between what the CRA withheld and what you owe.
