“We made the CERB’s eligibility criteria as broad and inclusive as possible so that workers who needed support could get it.This announcement is giving certainty to self-employed Canadians who applied for the CERB in good faith while also protecting their financial well-being.We have gone to great lengths to support workers during this pandemic and will continue to do so as we build back better together.” – Minister of Employment, Workforce Development and Disability Inclusion, Carla Qualtrough
CERB and other similar benefits were announced in response to the pandemic shortly after stay-at-home orders were in effect. This was the income that helped put food on the table and helped relieve stress and financial hardship during unprecedented times.
Although these benefits were incredibly beneficial, its quick setup left many confused and, frankly, desperate. Confused about whether they were eligible. Confused about the future repercussions. Confused about what would come next.
Not only did it confuse the applicants, but tax preparers, bookkeepers, and professionals alike. This post builds on my last post and explores the common misconceptions about CERB and similar federal COVID-19 benefits. In the hopes of clearing up some of the confusion surrounding these benefits.
CERB et al.
The Canada Revenue Agency, in conjunction with Service Canada, offered a variety of benefits during the pandemic, including the:
Canada Emergency Response Benefit (CERB)
Canada Recovery Benefit (CRB)
Canada Worker Lockdown Benefit (CWLB)
Canada Recovery Sickness Benefit (CRSB)
Canada Recovery Caregiving Benefit (CRCB)
Canada Emergency Student Benefit (CESB)
The volume of the types of benefits available, coupled with the stress and desperation of the situation, left people unclear about the process. This lack of information is costing Canadians money.
There were many options in terms of benefits, but the most common was CERB. So, for simplicity’s sake, we will focus on the misconceptions associated with CERB payments with a quick touch on the CRB.
Misconception #1: Apply Even if You’re Not Eligible.
I’m surprised to continue to hear from my clients that their previous tax preparers, bookkeepers, or accountants advised them to apply for CERB or other similar benefits even if they’re not eligible.
This could and has caused serious financial repercussions depending on the individual’s financial situation. For some who were already getting other types of income assistance, it meant a reduction in payments or a stop to payments altogether.
CERB Eligibility
First, let’s discuss CERBs eligibility requirements. Firstly, you had to either have reduced hours due to COVID-19 or not be working at all. You also couldn’t have quit your job voluntarily and had to of earned a minimum of $5,000 (before taxes) in the preceding 12 months or in 2019 from either self-employment, employment, or maternity or parental leave benefit income, among other requirements.
These payments were fast and straightforward, with no supporting documentation to prove eligibility required. Now, that’s all fine… if you qualified. If not, you likely received what’s being called an “education letter” from the Canada Revenue Agency advising that you need to pay it back.
Due to the quick rollout of this valuable benefit, there’s no surprise there was confusion surrounding who qualified and what impacts it would have in the future.
CERB and Income Assistance Programs
Not only have individuals been prompted to pay back CERB, but reductions in income assistance payments have targeted the most vulnerable people of our population – our low-income seniors. Many have seen Guaranteed Income Supplement (GIS) clawbacks due to getting CERB payments.
Federal benefits such as CERB and CRB are considered taxable income and have therefore affected the benefits subsequently payable in the summer of 2021 and 2022.
Not only do these federal benefits affect GIS, but also other benefits. Each province in Canada is treating each program differently. The University of Calgary further explored the details in a recent study.
Misconception #2: You Will Not Have To Pay Tax on CERB
There was also a common misconception floating around that CERB and other benefits were not subject to tax. That’s not the case.
All these benefits are considered taxable income and must be reported on your income tax return. Like in 2021, you will receive a T4A tax information slip from the Canada Revenue Agency setting out this income amount.
Unlike CERB, the CESB, CRB, CRSB, and CRCB were benefits taxed at the source; however, the 10% tax paid is likely not all you’d have to pay depending on your tax situation.
The Canada Revenue Agency also states that if you earned over $38,000 in net income in the calendar year, you need to pay back some or all of the benefit.
Interest Relief
The Government also agreed to provide interest relief to individuals with a total taxable income of $75,000 or less in 2020 and had received income support through one of the COVID-19 relief measures. The interest relief will soon collapse as it is payable by April 30, 2022.
Repayment Assistance
The good news is that the Canada Revenue Agency and Service Canada have acknowledged the confusion surrounding this quickly arranged benefit. Therefore, they are working with individuals to ensure hardships are not faced because of repayment and are offering grace periods for interest calculated on amounts owed.
The Canada Revenue Agency has put together a helpful guide regarding repayment and its effect on taxes to assist individuals in better understanding how this works.
Tell Me About Your Experience with CERB
This post should clear up any confusion about the misconceptions surrounding the COVID-19 related benefits that were and continue to be paid to Canadians.
Did I miss something? Do you have a misconception or a story you’d like to share? Not sure whether you qualify or qualified for benefits? Contact me today – I can help!