CRA Emergency Payments: 2 Massive Changes Coming

Invest in Toronto-Dominion Bank to grow your capital while you take advantage of the massive CRB and EI updates this year.

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The Canada Revenue Agency (CRA) launched the Canada Emergency Response Benefit (CERB) as the flagship COVID-19 program by the Canadian government in 2020. CERB became a lifeline for Canadians who lost income due to the pandemic. The program ended on September 27, 2020, and made way for CERB replacements.

The federal government revamped the Employment Insurance (EI) system and introduced the Canada Recovery Benefit (CRB) to transition Canadians still in need of financial aid. With no visible end to the pandemic, despite hopeful developments on the vaccine front, the government announced two major updates for EI and CRB.

Maximum duration

Many CRB recipients are due to exhaust their benefits on March 27, 2021. The government’s announcement to update CRB and EI came right on time. One of the changes introduced by the CRA will be an extension of CRB from the original 26 weeks to 38 weeks. For regular EI benefits, the CRA has extended the period to 50 weeks for claims made between September 27, 2020, and September 25, 2021.

The federal government also extended the Canada Recovery Caregiving Benefit (CRCB) and Canada Recovery Sick Benefit (CRSB). The CRCB duration is also 36 weeks after the update, while the CRSB has been extended from two to four weeks.

CRA cash benefit amount

The CRA pays $1,000 for each two-week CRB eligibility period, which is actually $900 after the 10% withholding tax is deducted at the source. For self-employed individuals who prefer access to their EI benefits through Service Canada, the government has reduced the self-employed income threshold (for 2020 earnings) from $7,555 to $5,000.

You can earn income while you receive CRB, provided that your annual income for the calendar year will not go over $38,000. You will need to pay 50% of each dollar of your income that goes above $38,000.

If you qualify for the EI benefit, the minimum amount you can receive per week is $500 (subject to a 10% tax on payment), but some people may be eligible to receive up to $573 per week, depending on their previous income. The proceeds for both CRSB and CRCB are $450 per week (subject to a 10% withholding tax upon payment).

Grow your benefits

Remember that all these payments you receive from the CRA or Service Canada are taxable benefits. CRB and EI will both count as part of your taxable income, and you may end up paying a chunk of the benefits during the next tax season. Fortunately, there is a way you can use the CRA cash benefits to earn more money without incurring income taxes on your earnings.

Using some of the money to invest in a Tax-Free Savings Account (TFSA) portfolio of reliable dividend stocks can help you earn tax-free income to grow your wealth. Toronto-Dominion Bank (TSX:TD)(NYSE:TD) could be an excellent asset to consider if you want to save some of the CRA cash benefits you receive and grow its value in the long run.

The Canadian bank recently reported its earnings, and it smashed analyst expectations with two strong quarters under its belt. The company’s shares are trading at all-time highs. TD is a strong Canadian financial institution that continues to expand its operations and increase its revenue growth.

Foolish takeaway

At writing, TD is up 39% from its valuation one year ago, and it sports a juicy 3.89% dividend yield. Investing in the bank using your CRA cash benefits and holding its shares in your TFSA could help you grow the value of the taxable benefits. You might still have to pay your taxes on the amount you received through CRB or EI, but the CRA cannot touch any of your TFSA dividend income that you might earn by investing the CRB or EI money.

TD could be an excellent asset to begin building a TFSA dividend income portfolio.

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 Adam Othman has no position in any of the stocks mentioned.

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