June 27, 2024
Many Canadians who received CERB are wondering if they will have to pay a portion of it back on their tax bill. How do you know where you stand?
If you received the Canada Emergency Response benefit (CERB) or the Canada Recovery Benefit (CRB) during the COVID-19 pandemic but were ineligible, according to the Canada Revenue Agency’s (CRA) criteria, you may have received a notice in the past few years saying you owe a portion or all of CERB as tax debt.
You’re not alone. According to a recent Globe and Mail report, the government is currently seeking $7.1 billion in CERB and CRB overpayments.
It’s a stressful position to be in. Many applied for financial assistance from the government during a time of great need during the pandemic.
The CRA is now starting to put pressure on those who have not paid money back. In a statement in late June of 2024, it said, “starting in July 2024, for individuals who have not responded or co-operated, and who have been determined to have the financial capacity to pay, legal warnings will be issued and legal measures could be taken to recover monies owed.”
“Legal measures are only taken when there is no cooperation from an individual with ability to repay the debt,” the statement added.
There are options available to anyone who owes CERB money. In this article, we provide solutions that work for both smaller amounts and for those who have been told to pay back all the money they received.
The CRA sent out notices last year to people it deemed ineligible to have received CERB and the CRB. It means that people will need to pay all, or a portion of, the money they received back to the government.
During the pandemic, people who lost their jobs or saw their workable hours reduced were eligible to access CERB, a $2000-per-month benefit. People who received CERB were ineligible to receive employment insurance (EI). To expedite the benefit, the CRA allowed people to determine their own eligibility. However, many CERB recipients have now learned that they weren’t eligible and will have to repay the payments they received in error.
Wait until you get a notice. The CRA has stated that there will be no penalties or interest on repaying CERB or CRB. There’s currently no deadline to repay the money as well. The CRA is being flexible as many people may have simply made a mistake during those frantic early months of the pandemic.
How did overpayments happen? As you probably remember, the beginning of the pandemic was a chaotic time and the rules around the eligibility period were not always clear. When CERB was first announced, Canadians could apply through either Service Canada or the CRA. However, some people applied for the benefit through both agencies, oftentimes by accident, and received a double payment.
You are encouraged to pay back the amount as soon as possible though. It’s a good idea to come to either pay the money back in full, or to come to an arrangement with the CRA before filing your taxes this year. If you don’t the money you owe could be deducted from your tax return, or any GST/HST tax credits you might be entitled to otherwise.
If you applied for CERB but weren’t eligible, don’t panic. The eligibility criteria for CERB weren’t exactly clear at the beginning of the program. Consequently, many people may have applied for CERB thinking they were eligible and later discovered that they weren’t.
The main reference points for determining eligibility are around income prior to COVID-19 and income during COVID-19.
For self-employed workers, the minimum earning requirement of $5000 has been subject to some confusion. However, the federal government just announced that self-employed individuals whose net self-employment income was less than $5,000 and who applied for the CERB will not be required to repay the CERB, as long as their gross self-employment income was at least $5,000 and they met all other eligibility criteria. This means the CRA will not be issuing CERB repayment notices for self-employed workers whose net (after tax) income is below the $5,000 threshold.
It’s also important to note that for some people, “income” could mean different things. For the CRA, however, “employment income” is directly related to your paycheque. It doesn’t include:
You may have lost a source of income due to COVID-19, but if your employment income (excluding the above benefits) was less than $5000 in the 12 months before applying, you’re unfortunately ineligible for CERB. On the other hand, if your employment income was affected by COVID-19 and your gross income is less than $1000 (excluding these benefits) you are still eligible for CERB. (For self-employed individuals, net income must be less than $1000 for each 4-week period). (For self-employed individuals, net income must be less than $1000 for each 4-week period).
If you have other questions about CERB eligibility, you can find more here.
Learn more about the best ways for dealing with unpaid taxes here.
Learn more hereIf you received a CERB overpayment and the amount you owe is less than $3,000, then one way to pay it back is to simply pay what you can afford each month. Let’s say you have $50 left over at the end of the month. If you send that $50 to the CRA, it will lower your debt. It’s not much, but it’s a start.
While the CRA can garnish wages for CERB payments, it is unlikely they will take this step if you only owe a few thousand dollars and are making an effort to pay some of the money back.
The CRA will, however, automatically stop giving you benefits/tax credits, such as the climate action incentive payment or HST/GST tax credits, because of your CERB debt. The money form those benefits and tax credits will be put towards paying your debt. They’ll also take any tax refund money you would have received and put that towards your debt.
If you can afford to forgo benefits/tax refunds, it will help pay off the debt faster. If you pay what you can while not receiving tax credits or a tax refund, the debt for a small amount of CERB money can be paid off relatively stress-free.
If these tax benefits are something you depend on, then it's an issue.
The first step is to get on top of your tax situation by completing and submitting any outstanding personal income tax returns as soon as possible. When you know exactly how much you owe, you will be better prepared to figure out how to manage your CERB tax debt.
Once you have a clear idea of how much CERB tax debt you owe, contact the CRA and establish a payment schedule that you can afford.
If you can’t afford to pay all your CERB tax debt in a lump sum, you can arrange a payment plan instead. This allows you to pay back your debt over time and in a way you can afford.
You can find the CRA’s payment plan here.
We still don’t know how the CRA will collect CERB repayment. But it’s most likely that CERB will be treated like any other form of tax debt. If this is the case, here are your options:
If you can’t pay your tax debt due to events beyond your control, like a serious illness, natural disaster, or loss of employment, you may apply for tax relief, which can waive or cancel penalties or interest. You may also need to engage the services of a tax professional to assist you with this application.
It may be possible to negotiate with the CRA about the amount of tax you owe by filing a consumer proposal.
A consumer proposal is a legal form of debt forgiveness, sanctioned by the Bankruptcy and Insolvency Act that provides protection from your creditors, lawsuits or wage garnishments, including the CRA.
In a consumer proposal, a Licensed Insolvency Trustee reduces your unsecured debts (credit card, line of credit, tax debt) to a significantly lesser amount by negotiating with your creditors. You can expect to pay back 30 to 80 per cent of your debts.
If you can’t pay your tax debt to the government and have explored all other options, you might consider filing for bankruptcy.
Similar to a consumer proposal, bankruptcy is a legal form of debt forgiveness. Both programs either reduce or eliminate unsecured debts, including tax debt. But there are many differences between a consumer proposal and bankruptcy that you should understand.
If it’s CERB or any other tax debt that you are dealing with, the first step for dealing with the situation would be to schedule a free consultation with a Licensed Insolvency Trustee (LIT). An LIT can help you explore all your debt relief options, from debt consolidation and debt management plans to formal debt forgiveness programs.
If it’s CERB or any other tax debt that you are dealing with, the first step for dealing with the situation would be to schedule a free consultation with a Licensed Insolvency Trustee (LIT). An LIT can help you explore all your debt relief options, from debt consolidation and debt management plans to formal debt forgiveness programs.
June 27, 2024
Many Canadians who received CERB are wondering if they will have to pay a portion of it back on their tax bill. How do you know where you stand?
