Repayment of CERB – Everything you need to know
During the COVID-19 pandemic, the Canada Emergency Response Benefit (CERB) was established to provide financial support to employed and self-employed Canadians.
Recently, many Canadians have begun receiving notices from the Canada Revenue Agency (CRA), stating that they may have not been eligible for support from CERB.
The notices being sent out state that you may not have been eligible for the CERB benefit because:
– You incorrectly received CERB payments from both Service Canada and the CRA,
– You did not earn the minimum income required to qualify
But what do these notices mean for you? Read on for more information.
Service Canada Vs. CRA
When CERB was first established, many Canadians were confused about where to apply, as, during this inaugural phase, there was an opportunity to apply through both Service Canada and the CRA.
Therefore, anyone that applied to both places at one time would have received double the benefit they were entitled to. If you fall into this category, unfortunately, you will need to repay the extra CERB you received.
The CRA did not actively review your income prior to approving you for the CERB benefit. This was done to allow the easiest and quickest access to funds during the COVID-19 pandemic.
Unfortunately, the rollout of CERB led to a lot of confusion, and many Canadians applied believing that they were eligible for the benefit, only to find out later that they weren’t. The following incomes are not considered employment or self-employment income, and therefore, are not eligible for the CERB:
– Pension income
– Disability benefits
– Student loans and bursaries
– Family support payments
– Social assistance payments
– Employment Insurance (EI) earnings
– Canada Child Benefits (CCB) or Working Income Tax Benefit (WITB)
– Investment Income
Many Canadians were under the impression that if they were unable to get a job due to COVID, they could collect CERB. However, technically that was not the case. The CRA has also interpreted income guidelines to mean net income, not gross income, which has resulted in some self-employed workers incorrectly receiving a notice of CERB repayment based on their net income levels.
To combat this, you may be able to file a T1 Adjustment form with the CRA to reduce the expenses you claimed in 2019. Once your net income exceeds $5,000, you would become eligible and not have to pay the CERB back. We recommend talking to a tax accountant or tax lawyer to see if this is possible.
The Canadian Government and the CRA understand that for many Canadians, the pandemic is still not over. Many remain ill, or out of work. As such, the CRA is not applying the full force of their collection efforts in regard to the pandemic benefit, but this could change now that the December 2021 deadline passed.
We, and CRA, encourage you to repay your CERB overpayment if you received the benefit in error. If you fail to do so, the debt will be added to your income tax bill.
When income tax is owed to the CRA, they will withhold your income tax refunds and any other benefits, including Canada Child Benefit, until they have been paid back in full. They also charge 6% annual interest, which is compounded daily!
Can’t repay CERB?
Like any other income tax debt, bankruptcy and consumer proposal proceedings can erase Government debts (unless those debts arose due to fraud). There has been no indication that the CRA will consider ineligible CERB claims as fraudulent, so we suspect the vast majority of claims will be fully dischargeable.
If you have received a collection letter from the CRA, you have three options:
– Prove your eligibility: First and foremost, try to prove you were eligible. Provide the CRA with whatever information they need to prove that you do not owe any repayment.
– Pay in full: Payments to the CRA had to be settled in full by December 31, 2021. You can try to contact them to make the payment in full but it may be too late to sort this out with them directly. If they will not entertain you…
– Consider a bankruptcy or consumer proposal: Speak with one of our licensed insolvency trustees to reduce your debts, including the CERB repayment benefit.