The Canada Emergency Response Benefit (CERB) was offered to Canadians starting back in March of 2020 to get financial support to Canadians as quickly as possible due to the impact of the COVID-19 pandemic.
To recap the CERB details, the benefit was provided by both the CRA and Service Canada depending on whether you applied through the CRA or had your EI earnings converted to CERB by Service Canada. To qualify for CERB, there were several requirements including having earned a minimum of $5,000 before taxes (in the previous 12 months or 2019) and you could not be earning more than $1,000 (before deductions) in the 4-week CERB period.
Though no longer available (we now have the Canada Recovery Benefit), there may be some Canadians that must deal with receiving CERB in 2020, when they should not have, as it has now been determined that they actually did not qualify for it.
There are several reasons why you might have to repay your CERB:
- Mistakes happen and perhaps an error was made in your calculations of earnings;
- You returned to work earlier than planned;
- You applied for it twice, through the CRA and Service Canada;
- After completing your taxes (or any time really) you now see that you did not meet the eligibility requirements.
What does this mean?
Let’s consider some situations where CERB repayment may or may not be required.
Self-Employed individual: The qualifying amount for SE individuals was the same for employed individuals as well, however, according to many self-employed Canadians, there was confusion as to whether the $5,000 earnings for a business were to be gross or net income.
As a result, in the third quarter of 2020, thousands of Self-Employed (SE) Canadians received a letter from the Canadian government, telling them that they did not qualify for the benefits that were received starting in March because these taxpayers did not earn the required $5,000 in 2019/2020 and would be required to repay the CERB they received.
In February 2021, the CRA addressed this issue, clarifying that those SE individuals whose net SE income was less than $5,000 would in fact not have to pay back the CERB payments they received provided that the gross value of their SE income was a minimum of $5,000 and all other criteria for eligibility was met.
What does this mean for those SE individuals that did pay back their CERB when they received this letter? According to the CRA notice, the CRA or Service Canada (depending on where CERB was applied for and received from) will be returning repayments.
If however, it has been determined that you did not meet the eligibility for CERB as an SE individual, you will be required to repay the CERB you received based on the specific period you received it for.
Employed Individual: Were you still working, but not working enough that you thought you qualified to receive CERB and applied for it? Many people still worked and qualified for CERB as their hours were significantly reduced. However, now that you’ve received your T4 from your employer outlining in the new 4 boxes (57 to 60) what you earned in the corresponding CERB periods, perhaps the reality is that you earned more than you thought.
What do you do now? On the CRA website, they have created a walkthrough to help you determine if you need to pay back your CERB and how to do so. Click here for to learn how.
The first thing you must do is review the earnings for the CERB period in question and if you did earn more than $1,000 (before deductions) for that period you may need to repay back the entire $2,000 benefit. Be sure to double-check the eligibility requirements first.
Unemployed Individual: If you were not working and were receiving EI benefits, those benefits were converted in most cases to CERB through Service Canada. If you made the mistake of applying for CERB as well through the CRA, you may have then received more than one CERB payment for the same period, and that will need to be repaid.
If your EI entitlement ended and you applied for CERB after that time, you may have qualified for the benefit provided you met the eligibility requirements. Be sure to check the requirements again and if you are unsure about your eligibility and whether you made an error, contact either the CRA or Service Canada (depending on your situation).
How do you pay it back?
There are several ways to pay back the CERB and it depends on who paid you.
- If you received CERB that you must pay back from the CRA, you can return the payment by mail, through your financial institution online banking, or, by using the CRA My Account payment feature.
- If you received CERB from Service Canada and must return some or all of it, you can pay it back through online banking and through mail.
Be sure you pay back your CERB to the same organization that paid you in the first place.
How these Benefits Impact our Income Taxes
40% of the Canadian work force, roughly 8 million people received at least one of the emergency benefit support through CERB, CESB, CRB, CRCB,CRSB, EI or any provincial emergency benefits! Provincial programs to support their citizens during this pandemic will be listed below. This applies to those that requested assistance through the Canada Revenue Agency or through Service Canada.
All of the recovery and emergency benefits are taxable, meaning they are to be reported on your 2020 income tax return. The recovery benefits did have some tax portions withheld, however CERB did not.
If you applied and received CERB and determined that you had to repay it back, it may or may not impact your income taxes for 2020, depending on when you returned the payment. If you paid back CERB prior to December 31, 2020, then the amount originally received would not be on your T4A or T4E; however, if you paid back the CERB in 2021, the CERB you received is reported on either of those two forms, but the repayment will be reported on your 2021 T4A slip.
Important to Note
Currently, the tax deadline has not changed for filing your 2020 income tax return. As an individual, your return and any taxes owing are due on April 30, 2021. For SE individuals, your return is due on June 15, 2021, but taxes owing are due on April 30, 2021.
What if you owe taxes and are unable to pay them by April 30th?
If you discover you owe income taxes for 2020 and are concerned about paying them there are some things you need to know.
First, don’t hold up filing your income tax return. The reason is that if you don’t file on time and have taxes owing you will likely find yourself hit with a failure to file penalty of 5% of your taxes owing.
Second, even if you owe taxes and can’t pay them, filing your income taxes allows you to still be considered for many government benefits or credits that require a filed return; also, you avoid this extra fee.
Earlier this year, the CRA announced that they are offering interest relief for taxes owing from 2020, only. What this means is that provided you file your 2020 income tax return on time, and if your total earned income was less than $75,000 in 2020, and you received one of the emergency or recovery benefits in 2020, there will be no interest charged to on taxes owing for 2020, until April 30, 2022!
Keep in mind, this only applies to taxes owing from 2020, not owing from any previous tax year.
Provincial COVID Support Programs:
(If your province is not listed, it’s because there are no provincial COVID measures taken)