Date

May 12, 2022

What you need to know about CERB overpayments

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?

Share
Facebook Twitter LinkedIn Whatsapp

What you need to know about CERB overpayments

Two women talking about money

In light of the CRAs latest announcement, many Canadians who received the Canadian Emergency Response Benefit (CERB) over the course of the pandemic are wondering if they will have to pay a portion of it back.

If you received CERB but were ineligible according to their criteria, you may be receiving a notice that you owe tax debt. 

How do you know where you stand and what if you are unable to repay your CERB tax debt? If you have concerns about being able to repay your tax debt, here is a Q&A about CERB repayment. We’ll continue to make updates, so be sure to bookmark this page.

What do the CRA’s “notices of redetermination” mean? 

The Canada Revenue Agency (CRA) has announced that people who have debts owing on their CRA accounts due to ineligible CERB payments will be receiving "notices of redetermination" that indicate debts owing on their CRA accounts.

What does this mean?

During the pandemic, people who lost their jobs or saw their workable hours reduced were eligible to access the $2000-per-month benefit. To expedite the benefit, the CRA allowed people to determine their own eligibility. However, for many CERB recipients, they are now learning that they weren’t eligible and will have to repay the payments they received in error. 

What if I received a CERB overpayment?

Wait until you get a notice. The CRA has stated that there will be no penalties or interest on repaying CERB. 

How did overpayments happen? 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. If this happened to you, the best course of action is to use the CRA’s CERB repayment tool

How do I know if I wasn’t eligible for CERB?

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.

  • Prior to the pandemic, you are eligible for CERB if you earned at least $5000 in 2019 or in the 12 months before applying.
  • During the pandemic, you are eligible for CERB if your income was impacted by the pandemic but does not exceed $1000 per month.

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:

  • Pension income
  • Disability benefits
  • Student loans and or bursaries
  • Family support payments
  • Social assistance payments
  • EI earnings
  • Canada Child Benefits (CCB) or Working Income Tax Benefit (WITB)
  • Investment income

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).

You can read more about eligibility for CERB here.

What can I do to repay my CERB tax debt?

  • File your taxes 

The first step is to get on top of your tax situation by completing and submitting your 2020 tax return 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.

  • Communicate with CRA

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. Note that the CRA typically charges interest on remaining balances at a rate of 5 per cent, plus penalties if the tax return is filed late.

What if I can’t repay my CERB tax debt?

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:

Apply for taxpayer relief

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.   

Reducing tax debt through a consumer proposal

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.

Can you eliminate tax debt by filing bankruptcy?

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.

Do you have more questions?

Date

May 12, 2022

What you need to know about CERB overpayments

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?

Share
Facebook Twitter LinkedIn Whatsapp