The Canada Workers Benefit (CWB) of the Working Income Tax Benefit (WITB) is a type of refundable tax credit provided by the Canadian Government. It is quite similar to America’s Earned Income Tax Credit (EITC). It was introduced as the Working Income Tax Benefit (WITB) in 2007. It offers tax relief to working low-income individuals while also encouraging other people to enter the workforce. The WITB has been expanded considerably since its introduction and restructured in depth by the 2018 Canadian federal budget when it was renamed the Canada Workers Benefit. Let’s find out more about it.
Working Income Tax Benefit (Canada Workers Benefit): All You Need to Know
When was the Working Income Tax Benefit Introduced?
The Working Income Tax Benefit (WITB) was announced as a part of the Economic and Fiscal Update of November 2005. It was scheduled to enter into force on 1 January 2008. In its first budget, the newly elected Harper government reiterated the intention of the federal government to go forward with the implementation of the WITB. The WITB was ultimately implemented by the 2007 Canadian federal budget, a year earlier than planned initially.
When was WITB changed to CWB?
The Canadian Federal Budget of 2018 renamed and replaced the Working Income Tax Benefit (WITB) as the Canada Workers Benefit (CWB). The CWB is an enhanced version of the WITB which provides added benefits and comes with a higher income level for phasing out the benefits. The eligibility is automatically tested by the Canada Revenue Agency at the time filing the taxes. This is done in order to enhance the program’s accessibility.
What is Working Income Tax Benefit?
For 2019 and subsequent taxation years, the budget proposes to introduce the Canada Workers Benefit (CWB), an enhanced version of the Working Income Tax Benefit (WITB). The WITB serves as a refundable tax credit that supplements the earnings of low income workers and provides additional work incentives for Canadians who earn a lower income.
The budget proposes that the amount of the CWB will be equal to 26% of each dollar of earned income over $3,000, to a maximum credit of $1,355 for single individuals without children and $2,335 for families (couples and single parents). The maximum credit is reduced by 12% of adjusted net income over $12,820 for single individuals without children and $17,025 for families.
What is Working Income Tax Disability Benefit?
Individuals who are eligible for the Disability Tax Credit along with the CWB are also eligible for receiving the CWB disability supplement. 2019 onwards, the budget has proposed an increase in the CWB disability supplement (formerly known as the WITB disability supplement).
As per the budget, the maximum amount will be $700 in 2019. It will be reduced by 12% (6% if both spouses or common-law partners in a family are eligible for the supplement) of adjusted net income over $24,111 for single individuals without children and $36,483 for families.
Who is eligible for Working Income Tax Disability Benefit and what do they receive?
In order to be eligible for the Working Income Tax Disability Benefit (WITB), the applicant and the spouse must be a resident of Canada. The person must be at least 19 years old as of December 31st 2019 and can’t be a full time student. The WITB can be claimed on line 453 (45300 since the 2019 tax year) of the income tax return in case the income is over $3,000 in a calendar year. However, the additional paperwork required to claim the credit is complex, involving a 42-step process on Schedule 6 of Canada’s main income-tax form.
As of 2016, the WITB’s value is $1,028 for an individual and $1,868 for couples and single-parent families. Benefits increase and then decrease with income. At an income of $18,529 for single individuals or $28,576 for families, the benefits decrease to $0. WITB is estimated to benefit 1.4 million working Canadians annually, at a cost to the federal government of CDN$1.2 billion. In October 2017, the Liberal government of Justin Trudeau promised to expand the benefit by $500 million annually, beginning in 2019.
Consistently since 2009, only about 85% of all working Canadians eligible for the WITB have claimed their benefit, with particularly low uptake in Atlantic Canada and the Prairie provinces. In 2017, this left an estimated CDN$175 million in benefits unclaimed by 240,000 eligible low-income Canadians. This is thought by the Canada Revenue Agency (CRA) to be due to a mixture of lack of awareness and the complexity of the forms required to claim the benefit. CRA is working to increase uptake by expanding its support for free volunteer tax-preparation services and by scaling up a 2016 pilot project in New Brunswick, which highlighted the program to persons likely eligible for the program and was judged to have had a “positive impact.”