The Canada Emergency Response Benefit (CERB) has been an exceptional source of financial support for Canadians during the pandemic, but it’s also been a constant source of confusion and stress.
The program has changed multiple times throughout this last year, leaving many recipients of the benefit confused, unsure and overwhelmed. Oftentimes it’s hard to keep up, especially considering the frequent and changing news we are presented with.
It’s important to be aware of your options for financial help during COVID-19 so you know what you can turn to when your income is insecure.
Like the current state of the world, CERB’s regulations and approach are constantly changing. We’ve rounded up all the most recent CERB updates to ensure you are in the know about the current status of the benefit program.
CERB Has Changed:
One of the most important CERB updates that you should know about is that it no longer exists. The CERB program officially ended in September 2020.
That said, this doesn’t mean that the federal government has removed access to individual financial aid during the pandemic. The government has instead expanded the Employment Insurance (EI) program and created the Canada Response Benefit (CRB) program for those who were not eligible for EI. You can visit the government website to find the latest updates for these CERB replacements.
The good news is that these programs won’t be leaving anytime soon. In fact, Prime Minister Justin Trudeau recently announced extensions for emergency response benefits to help struggling Canadians. The CRB program can be used for 38 weeks now, and EI can be used for 50 weeks.
CERB Repayments Have Been Cancelled
Another important piece of CERB news that you should be aware of is that a number of self-employed Canadians are no longer required to repay their emergency benefits.
You may have heard that thousands of self-employed citizens who applied for CERB during the past year received letters saying that they would have to repay their benefits. The Canada Revenue Agency (CRA) believed that these applicants were not eligible for these emergency benefits based on their income.
These applicants interpreted the eligibility requirements to be based on their gross income, not their net income. But what’s the difference?
- Gross Income: The total amount that you earn without considering taxes or deductions.
- Net Income: The amount that you earn after you subtract taxes and other deductions from your gross income. It’s sometimes called “after-tax income.”
Recipients of these CRA letters were upset by this development. They assumed they were eligible for financial aid during a pandemic and later learned that they had to repay all of it.
The good thing about this CERB news is that, after the public outcry, the federal government recently announced that the recipients of these letters would not have to repay their benefits if they met all other requirements. They stated that these individuals should not pay for mistakes that they made due to misinformation and miscommunication from the government.
This brings us to the people who repaid the CRA already. The latest news about this CERB problem is that people who repaid their benefits because of the eligibility mix-up will get their money back.
Other CERB Repayments:
Unfortunately, not all Canadians who applied for CERB can stop worrying about repayments. It’s still possible that you misinterpreted the eligibility requirements and got more financial aid than intended.
For instance, applicants who “double-dipped” with financial aid are still expected to repay. This is applicable for those who applied for CERB through the CRA and Service Canada at the same time. By receiving the benefit from both sources, individuals were able to double their funds, but not without consequences. If you did this during the past year, you will have to repay the funds that you received from one of them (even if it was an honest mistake).
Consider the many reasons why you should repay CERB and how you can do it.
What If You Can’t Repay?
The CRA expected individuals who needed to repay CERB benefits to do so voluntarily by the deadline of December 31st, 2020. But what if you missed the deadline? Individuals that missed that deadline automatically had their repayments added to their tax slip for the year. So, you still owe the CRA. If you don’t repay them this year, they can keep future tax refunds, benefits and credits from you.
So far, the CRA has announced a soft approach to collecting funds that they’re owed. Normally, the CRA can adopt tough measures to collect their funds, including garnishing people’s wages and freezing their bank accounts.
If you can’t afford to repay the funds in a reasonable time or manner, for whatever reason, you should book a consultation with one of our licensed insolvency trustees. They can look into your financial situation to determine the best way to tackle your debts. You could achieve this goal with the help of our credit counselling services and careful budgeting. If that’s not enough, you may need to consider filing for a consumer proposal or personal bankruptcy.
Updates on CERB and Income Taxes
One of the biggest complications with CERB is how it affects your income taxes. If you needed financial aid in 2020, you should consider the most recent CERB updates before tax season begins.
Is There a Filing Extension?
No, there isn’t. The CRA extended the deadline to file 2019 income tax returns last year, but they have not announced a filing extension for this year.
The deadline to file for your 2020 income tax return is still April 30th, 2021. If you’re self-employed, you have until June 15th, 2021, to file.
Is CERB Taxable?
CERB is considered taxable income. The CRA did not withhold any taxes at the source, so you will have to calculate and pay off the taxable portions yourself. Read our blog about the drawback of COVID-19 financial help to see what you can do to prepare for your tax returns this year.
Other forms of COVID-19 financial help are also taxable. However, Employment Insurance benefits are taxed at the source. A 10% tax is held at the source for the Canada Recovery Benefit, the Canada Recovery Sickness Benefit and the Canada Recovery Caregiving Benefit. This should make filing a little easier.
What Happens If You Repaid Benefits?
If you needed to repay your CERB to the CRA and did so by December 31st, 2020, you will not owe taxes for it. If you repaid a portion of what you owed, you will only owe taxes for the remainder.
What about Interest?
Another CERB update that you should know about is the federal government recently announced that they are offering targeted interest relief to Canadians who needed COVID-19 financial aid. Once you have filed your 2020 income taxes, you will have until April 30th, 2022, to pay interest on any outstanding income tax debt for the 2020 tax year.
This is one of the best CERB updates for people who are still struggling financially. Pausing interest on these outstanding debts will make it easier for you to save money and manage payments to the CRA over the course of the year.
What If You Can’t Pay Your Taxes?
It’s understandable that you’re not able to pay the CRA what you owe this year. Maybe you’ve been receiving financial aid, and you couldn’t afford to set aside any savings. Maybe you have other pressing debts to deal with at the moment, and the CRA payments are not your top priority. You’re not alone. Consider how COVID-19’s impacts on household debt have affected people all across the Greater Toronto Area.
If you’re worried that you can’t pay your taxes, you have two options: call the CRA or call a licensed insolvency trustee firm.
Call the CRA:
If you can pay what you owe, but you need a little more time to do it, you should contact the CRA to see whether you can arrange a repayment plan. They could offer you a more manageable schedule.
Call David Sklar:
If you don’t think that you can pay in a reasonable time or manner, then you should contact our Licensed Insolvency Trustees at David Sklar & Associates and book a consultation. Our trustees will look over your personal finances to determine the best way to repay your debts to the CRA, as well as your debts to other creditors.
Our trustees might suggest a consumer proposal as a debt repayment strategy. A proposal pauses interest rates and penalties that can make your outstanding debts grow. It also stops your creditors from taking legal action against you, which can come in handy when you’re dealing with a creditor as powerful as the CRA. Get in touch to learn more about our consumer proposal services to see if they are the right fit for you.
Learning these updates on CERB should help you manage your finances this year. Now, you know whether you have to make repayments to the CRA, what new forms of financial aid you can rely on, and what to do when it comes time to file your taxes.