Last year when COVID-19 hit, the Canadian Government was quick to come to the aid of who Canadians who lost their income due to the COVID -19 pandemic. That was a good thing. The Canadian Emergency Response Benefit (“CERB”) was created to provide a benefit of up to $2,000.00 per month to qualifying individuals, for up to 28 weeks. About 9 million Canadians received CERB benefits. Over $81 billion was paid out.
Late last year, about a half a million Canadians received letters from the Canada Revenue Agency (“CRA”) stating that they may have been paid in error and will have to repay those benefits. The repayment recipients essentially fall into two groups. One group, is those people who received the benefit twice. This was because the payout was administered by two different Government agencies namely, – Service Canada and the CRA. Many people were uncertain as to how to apply for the benefits so they applied through both channels, and ended up getting paid benefits from both agencies, when they should only have been paid by EITHER Service Canada OR the CRA, but not both. What we lawyers describe as a Government cock-up.
The second group of repayment recipients are individuals who were not eligible to receive the benefits in the first place. In order to be eligible , you had to make at least $5,000.00 in 2019 or in the 12 months before you applied for CERB. On the CRA website, it was not clearly stated that the $5,000.00 threshold is to be calculated as “net income” not “gross income”. Net income is your pre-tax income after deducting allowable expenses.
For CERB eligibility requirements click here
Furthermore, taxpayers who called the CRA information line for clarification, were given wrong advice. As a result, many people who had earned $5,000.00 in gross income thought they were eligible, and so they applied for and received benefits, when they were ineligible.
Last month, the Federal Government did an about-face and said that self-employed persons who applied for the Canada Emergency Response Benefit based on “gross income” instead of “net income” won’t have to repay the benefits after all, provided they meet all of the other criteria. Those who have already repaid it will have the money returned to them.
What many people also don’t realize though is that the CERB payments are a “taxable benefit”, which means it will be treated as income, and you’ll have to pay income tax on it.
But there is more good news in the form of interest relief. The CRA recently announced that interest on income taxes will be waived until April 30, 2022. Individuals need to earn less than $75,000 to qualify for the relief.