The Canada Revenue Agency (“CRA” ) has recently been sending out letters to recipients of the Canada Emergency Response Benefit (“CERB”) stating that they must repay the benefits they received because they did not earn a net income of $5,000.00 in 2019 or in the 12 months prior to making the application.
You may recall that when COVID-19 hit in March of 2020, the Canadian Government introduced the Canada Emergency Response Benefit (“CERB”) as an emergency income support for people unable to work due to COVID. The CERB provided up to $500.00 a week between March 15, 2020 and October 3, 2020 for up to 28 weeks. One of the requirements for eligibility was that an applicant must have had a total income of at least $5,000.00 from employment or self-employment income in 2019 or the 12 months prior to making an application. The Government subsequently took the position that for self-employed persons, the $5,000.00 threshold meant “net income”, defined as, gross income minus any expenses to earn that income. However, it didn’t say “net income” in the eligibility criteria on their website and many people applied for and received benefits reporting “gross income” instead of “net income” on their application.
In late November of 2020, the Government sent out approximately 441,000 letters to CERB recipients stating that they would have to repay the benefits if they did not meet the $5,000.00 “net income” criteria. This caused a political uproar and the Government backed down issuing a statement stating that people who applied for the CERB based on $5.000.00 “gross income” would not have to repay the benefits and people who had repaid it voluntarily would get a refund.
To make it official, the Government issued a Remission Order on May 12,2021, which essentially permitted CERB recipients who had received benefits based on “gross income” to keep the money and get a refund if they had already repaid it.
Click here to read the full Remission Order
I’ve seen a few of these recent repayment letters that the CRA has been sending out to recipients and it seems to me that the benefits received are covered by the Remission Order (at least for the recipients I’ve talked with). If it is covered by the Remission Order then those recipients should not have to repay the CERB benefits they received. That would be my first response to CRA for anyone who has received a letter asking them to repay the CERB benefits.
Previously, a class action lawsuit had been commenced in Federal Court against the Government when the initial set of letters to recipients had been sent out in 2020, but that case was withdrawn shortly after the Remission Order was issued. If the CRA persists this time around, then an affected recipient may have to commence legal proceedings in Federal Court for, among, other things, a declaration that you don’t have to repay the benefits.
Of course, each case will depend on its own facts, so always consult a tax professional first.
The CERB closed for retroactive applications on December 2, 2020.
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