The Canada Revenue Agency (CRA) did a splendid job distributing generous cash benefits to more than eight million Canadians. Many of them are receiving benefits even now as the pandemic effect continues. With the onset of the tax season, it is time to repay some of these benefits amounts. You will get an idea of the tax bill on these cash benefits in the T4A slip the CRA will send to you by March 10, 2021.
What is a T4A slip? You will get a T4 slip from your employer by the end of February. It will summarize your employment earnings and deductions for the year. Last year, many Canadians lost their job and relied on the COVID-19 benefits distributed by the CRA and Service Canada.
Among the many benefits, the taxable ones are the Canada Emergency Response Benefit (CERB), the Canada Emergency Student Benefit (CESB), the Canada Recovery Benefit (CRB), the Canada Recovery Caregiving Benefit (CRCB), and the Canada Recovery Sickness Benefit (CRSB).
If you availed of any of the above benefits, you will get:
- T4A slip if your received benefits from the CRA
- T4E slip if your received benefits from Service Canada, and
- RL-1 slip if you worked or stayed in Quebec.
How to check your T4A slip Once you receive your T4A slip, verify the amount of the benefits. If you repaid any of the cash benefits before December 31, 2020, that will be deducted from your tax slip. However, benefits repayment after December 31, 2020, will not reflect in your tax slip. You will have to pay tax on those benefits, and the CRA will adjust your repayment in the 2021 tax year.
If your net income after excluding the CRB amount exceeds $38,000, the CRA will claw back 50% of the surplus income up to the CRB amount you received. The CRA will add the repayments, if any, to your balance owed for the 2020 tax year.
In case of discrepancies in the tax slip, call the CRA, Service Canada, or employer and get an amended tax slip. If you have filed your tax returns using the original tax slip, wait till the CRA sends you the notice of assessment (NOA) to make any changes. If you are registered for CRA email notifications, you will get your NOA immediately after you file your returns. For paper return, it will take eight weeks.
But don’t miss your tax filing deadline of April 30 because you didn’t receive the amended tax slip. The CRA will impose a penalty for delays. Instead, file your returns using the original tax slip. The CRA will consider the amended tax slip while assessing your returns.
Save your tax using RRSP If your tax bill is high, you have time till March 1 to reduce it by investing in Registered Retirement Savings Plan (RRSP). But there are many restrictions to RRSP withdrawals. So only invest in it if you want to save for retirement.
You can invest your RRSP money in the energy infrastructure company TC Energy (TSX:TRP)(NYSE:TRP). It has a 20-year history of paying incremental dividends, growing it at an average annual rate of 7%. It earns predictable cash flows from its integrated model of power generation, oil and natural gas transmission, and storage.
The stock is still trading at a 26% discount from its pre-pandemic level and has a dividend yield of 6.26%. If you invest $5,000 in TC Energy, you will accumulate $4,300 in dividend income by 2030 if it increases dividend at an average rate of 7%.
The post It’s Time to Repay the CRA Cash Benefits: Check Your T4A Slip for Details appeared first on The Motley Fool Canada.
Fool contributor Puja Tayal has no position in any of the stocks mentioned.
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