Dec. 18, 2020
Are you a Canada Emergency Response Benefit (CERB) recipient worried you will have to pay back thousands of dollars?
On Thursday afternoon, Toronto Star business reporter Rosa Saba joined readers to answer questions about CERB and the CRA.
As reported last week by Saba, thousands of self-employed CERB recipients received letters from the Canada Revenue Agency (CRA) saying they may have to pay thousands of dollars back, an unexpected development that also revealed even the agency’s own employees may have been confused about eligibility.
This week, the Star also confirmed CRA agents provided incorrect information to CERB recipients. Further, the CRA may have quietly updated its own website after people began applying for the CERB benefits to add crucial information about eligibility that was not originally provided.
Read our full Q&A below:
Question from Brad: Is CERB still ongoing? What else can people apply for now?
A: Hi Brad! CERB is over, and the deadline to apply for it retroactively has ended too. But there are now different benefits available. The most similar one is the Canada Recovery Benefit. It’s aimed at people who don’t qualify for EI (if you qualify for EI, apply for that! The requirements are easier right now during the pandemic.) There are also separate benefits for caregivers and for people who have COVID or are isolating because of COVID. The temporary benefits will be around for a year.
Question from Kevin: Are Canadians able to amend their 2019 taxes to eliminate some allowable deductions thus increasing their net income as some MPs are on record of suggesting? Although this is not right or just to make someone do, the federal government has left few alternatives.
A: Hi Kevin! Some media outlets have quoted tax experts recommending this. None of the experts I interviewed recommended this, and so I can’t recommend it either. I don’t know the possible repercussions.
Question from Aileen: My son was laid off in April and collected CERB. Was terminated in July and received severance, but also collected CERB for that month. Does he need to repay that month’s CERB?
A: Hi Aileen! The CERB Q&A page says: “A severance payment does not impact an individual’s eligibility for the Canada Emergency Response Benefit.” Looks like your son is in the clear!
Question from Dave: I’m part of the gig economy I do odd jobs and manage to earn some side income. COVID put an end to that. So I applied for the CERB. I don’t have receipts of the jobs I have done. Is CRA going to ask for proof now? I am worried.
A: Hi Dave! You should have a record of all money you make in some form, and this side income would likely be claimed on your taxes as either “self-employed” income or just piece work, depending on how much you made. If it’s through an app like Uber, you should have all the proof you need of income. If it’s not through an app, I’m not totally sure how it would work, but I do know that CERB and the new benefits were made to include people who work through the gig economy, so presumably this is taken into account — if it’s not, I’ll look into it. I hope that helps!
Question from Anna: Hello Rosa, thank you for doing this. I have declared gross income of over $5,000 (from my business,) so my net income was less than $5,000. Unfortunately, I had an accident two years ago, where my spine was fractured and I can’t do my other job. I have applied for CERB in good faith and am not in a position to pay it back. What can I do? Thank you.What about the adjustment form?
A: Hi Anna, I wish I had a better answer for you. I know a lot of people applied to CERB in good faith, and I can’t imagine what it’s like to be in this position. Currently, the government has said it won’t be offering “debt relief” to people in this position (source: Employment Minister quoted by CBC News.) However, in the same article, the Minister said “nothing is off the table.” I think it’s best to continue to follow this story and see if something changes. I do also want to note that the CRA has said it won’t charge interest on CERB repayments. Again, I’m sorry you’re in this position and I wish I had a better answer for you!
As for the adjustment form, non of the tax experts I interviewed recommended this, and so I’m not comfortable recommending it, as I’m unsure what the repercussions would be. Some other experts have recommended it in stories by other media outlets. I’ll be looking into the adjustment form as an option, and if I definitely find out that it is an option with no repercussions, I will make sure to report on it!
Question from Kevin: Hi Rosa, if the CERB funds are not paid back by Dec. 31 and a T4a slip is issued, when the Child Tax benefit is calculated for July 2021, will the CCB calculation result in lower CCB because of the T4a “income?”
A: Hi Kevin! The CRA has indicated that if CERB repayments aren’t made in time, they will affect your taxes. That’s because you have to pay taxes on them as income. So, that CERB income will affect any other benefit or credit that can be affected by your income level.
Question from Liam: If you haven’t received a letter, does that mean you are in the clear? How do we know we don’t have to repay?
A: Hi Liam! The CRA has said it will reach out to people if they need to repay. Check your CRA account just in case, as these letters arrived online. But if you don’t have one, sounds like you’re good! The CRA told me they had sent out all the letters already.
Question from Harold: When you do supply documents to prove net income, how long does it take to have the issue adjudicated after they have sent a notice saying eligibility is in doubt? Any ideas?
A: Hi Harold! These letters went out a couple of weeks ago, and so we haven’t gotten far enough in the process to see how long it takes. I will continue to monitor this, and I’m hoping to hear from readers who go through this process so I can provide some clarity for everyone else!
Question from Simon: I’m a seasonal worker (work during summer full time) and I do work a little during school year (I’m in university.) I have two questions.
My first question is the $5,000 requirement for the employed is it gross or net? I understand that the CRA told the public for self-employed worker is net. However nothing was mentioned for the employed.
If you refuse to settle for second hand news and think that your loved ones shouldn’t either, give them the gift of the Star.
My second question is: is the $5,000 requirement retroactive (for every application or if the subsequent applications would not require as long as this requirement was met during the first application )? For example, if you meet the requirement of $5,000 for the first cycle (March 2019 to March 2020) but you don’t meet the requirement if it was your sixth cycle (August 2019 to August 2020). I called the CRA multiple times and they gave me different answers. Six of them said that once this requirement is met for the first application, you are good. One of them said it’s retroactive.
I have no desire to take what I’m not eligible for. However, in this case, I don’t even know if I am eligible because the requirements are not clear and the CRA is not helping by giving contradictory information to the citizens.
A: Hi Simon! Thanks for your question. If you’re an employee, and not self-employed, your income is considered “net” already as long as your employer is taking taxes and other things off your paycheque. “Net” vs “gross” in the context of self-employed people refers to the business expenses they incur, which a regular employee would not need to worry about.
Question from Aubrey: A Global news article on Dec. 11 suggests that self-employed Canadians who are worried about their eligibility should file a T1-ADJ to readjust their expenses to meet the $5,000 net income threshold. However, I have seen advice elsewhere that doing so could flag people for audits or even be construed as fraud. Is filing a T1-ADJ a reasonable work-around or putting people at more risk?
A: Hi Aubrey. Many people have asked me whether they should amend their 2019 tax return to remove some of the business expenses that tipped their net income below $5,000. I will not be giving out advice on this. I will note that some other media outlets have published advice from experts telling people to do this. However, none of the tax experts I interviewed for my reporting advised this, as the repercussions of doing so are unclear. Therefore, I don’t feel comfortable advising people on this matter. Sorry!
Question from Reg: CRA charges interest at 5 per cent, while banks charge about half of that. CRA will start charging interest in about two weeks, so it’s getting pretty urgent for the government to do something if it’s going to. Have you seen any indication that they are going to step up and fix this?
A: Hi Reg! Thanks for your comment. I want to clarify that the CRA has said it will not be charging interest on CERB repayments. However, when it comes to “fixing” the situation in terms of confusion around CERB eligibility, Employment Minister Carla Qualtrough recently told CBC that the government will not be letting people off the hook.
Question from Kevin: Why have agents at the CRA, MPs across Canada as well as the former Minister of Finance Bill Morneau (on record mind you) say that revenue or gross income is used to apply? Even after CRA agents were told by the individual their net income was less than $5,000 in 2019 that they were eligible to apply. Were they aware of how this information would impact their lives and families?
A: Hi Kevin. I hear your frustration, but I can’t comment on what happens behind the scenes, as I truly do not have information other than what I reported on. My analysis is that it sounds like CRA agents themselves were confused about the eligibility rules. I do not believe they would have maliciously given out incorrect information; they are just employees dealing with a flood of questions. I also cannot comment on the intention of the prime minister or what he is or is not aware of. I would refer you to my previous comment, that this was one of several emergency programs rolled out very quickly. This isn’t an excuse for the confusion, or a justification, but it is a fact that I believe contributes to the likelihood of there being issues later on.
Question from Joel: For those relying on the self employed income they earned in the 12 months before applying for CERB in April of this year 2020, how will this look? How will the CRA ask for proof of self employed income from April 1, 2019 to March 31, 2020, for example? Income is always reported based on the calendar year for tax purposes. I’m sure many self employed CERB recipients are eligible based on earning over $5,000 net from the 12 month’s worth of self employed earnings preceding their initial CERB application. Personally I think the CRA is so overwhelmed at the moment and even they haven’t thought this through properly, but at the end of the day, this was one of the options for the $5,000 test, so they need to honour it as many people are relying on this 12 month criteria. Thank you and stay safe everyone!
A: Thanks for your question, Joel! I’ve heard from a lot of people concerned about proving their income during the 12-month eligibility period (as compared to the 2019 eligibility period). I don’t yet know how this will play out but I’m assuming it will be linked to tax season, which would be the final say on whether or not you’re eligible. However, the CRA’s letters indicate that it’s now looking for proof of that income, so it’s possible you’ll be able to prove that income before tax season. I will seek more clarity on this, but I hope this helps!
Question from Geoff: Hi Rosa — question on how CERB would effect DTC (disability tax credits) and/or CPP-D? If one receive CPP-D and has the DTC, but applied and received CERB for all the periods offered, would it be better to return the CERB funds or to keep the CERB and pay any penalties at tax time?
A: Hi Geoff, I can’t give advice on how to deal with this situation, but I will say that if you’re not eligible for CERB, it won’t be just a penalty at tax time — you will be asked to pay it all back eventually. However, you should double check your situation. The CERB Q&A page says people receiving disability benefits can still receive CERB, as long as they stopped working due to COVID-19.
Question from Shana: Everybody needs to watch the clip from question period in the House of Commons in March 2020 where former Finance Min, Morneau, stated you needed $5,000 minimum revenue (which is defined as gross income not net). So how the hell is the general public not going to be confused by CRA and their audacity at trying to clawback payments now? This is a major issue for legal action for sure.
A: A lot of people have sent me that clip of Bill Morneau using the word “revenue” when talking about CERB eligibility. I can absolutely understand the frustration of this, as “revenue” is not the same as “income,” and this statement seems to contradict the CRA’s messaging. However, for the purposes of my reporting I stuck to the information that CERB applicants would have been faced with, since terms like revenue and income are sometimes confused during speech. I hope that makes sense!
Bonus! A tip from our reporter: I want to bring up something that has come up a lot in my reporting. The letters that went out (441,000 of them) do not mean every single one of those people have to pay back their CERB — they are the CRA saying they couldn’t confirm eligibility. So if you received the letter and you are confused as to why, the best thing to do is get right on it and figure out what documents the CRA needs. It’s quite possible you’re in the clear!
