Save up for taxes on forgivable CEBA loans
Plus, questions about CERB, Bitcoin profits
Millions of Quebecers got COVID-19 assistance from governments in 2020, many without a clear understanding of the financial implications. This week's first reader letter is an illustration of how some benefits weren't exactly as initially perceived.
Q As a self-employed person with a small business, I received the pandemic-related Canada Emergency Business Account (CEBA), which first allowed $10,000 of a $40,000 loan to be forgiven if the rest is repaid by the end of 2022 and has now been expanded to forgiving $20,000 of $60,000. I saw a reference that the amount forgiven might be taxable in the year it was received — in my case, 2020 — not the year the forgiveness is actually granted, 2022. Can you confirm this? If I'd have known, I might have deferred applying for the additional portion until 2021 to spread the benefit over two years. None of the documentation for the program mentioned the forgiven amount would be taxable at all.
A Sorry to be the bearer of bad news, but the Canada Revenue Agency confirmed the forgivable amount of a CEBA loan must be included as income and is taxable in the year you received it — for you, 2020. That also applies for Revenue Quebec.
Q I am a full-time student at Concordia University who collected the Canada Emergency Response Benefit (CERB) until September. Am I eligible for any other income now, such as Employment Insurance?
A: Full-time students generally are not eligible for EI, although they were eligible for CERB or the Canada Emergency Student Benefit ( both now terminated). Ottawa did boost its student grants and loans program in response to the pandemic, if you qualify.
Q I made a profit with Bitcoin trades in 2020. Is that taxable?
A It is, both federally and provincially. The profits will be treated as capital gains or business income, depending on the circumstances. Tax departments expect you to keep a record of the value, in Canadian dollars, of the cryptocurrency trades you made, on the days you made them.
Q I'm a salaried employee with employment expenses that I generally deduct on my tax returns every year. This year, I started a side project that generated a small amount of income (about $250), and expenses that I normally wouldn't be allowed to deduct as a salaried employee. Should I declare this income as a self-employed person in order to deduct these expenses?
A Are you sure you want to go down that road and alter your profile with tax departments? Side projects with more expenses than revenue are an invitation to scrutiny. Until and unless your new venture starts generating significant sums, it's probably best to report the revenue as other income and stick to the expenses you ordinarily deduct.