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CERB Overpayments and Penalties: What we know so far

CERB Overpayment and Penalties, Grant Thornton Limited

Editor’s Note: This post was originally published in July 2020 and has been completely revamped and updated for accuracy and comprehensiveness as of December 18, 2020. As of December 2, 2020 the CERB closed to retroactive applications and Canadians are no longer able to apply for the benefit.

The Canada Emergency Response Benefit (CERB) has been helpful to those who have lost their jobs or a portion of their income due to COVID-19. However, when it was first announced, it came fast and furiously, with little details around qualifications. Because of this, many people who applied for the benefit may have wrongly been given money or have been notified of a CERB overpayment.

Canadians are seeing an increase in letters from CRA regarding the repayment of amounts for which they may not have been eligible and there remains much uncertainty around how the overpayments will be collected.

Q: I’ve received a letter indicating that I owe for a CERB overpayment, what does this mean?

A: If you’ve received notice of a CERB overpayment, this means there was a mistake regarding your CERB payment, and you now must return or repay the money the federal government overpaid to you. This most likely occurred because you did not meet the eligibility requirements for the 4-week period in question, i.e.:

  • You applied for CERB but realized you were not eligible after the fact;
  • You earned more from your employment than you initially anticipated; or
  • You received two CERB payments, one from CRA and one from Service Canada.

Q: What are the potential implications of having a CERB overpayment?

A: Just like any other lender, the government will want back the money that is owed to them. If you have not spent the money or can afford to pay back your CERB overpayment, it is highly recommended to do so. Not only will it clear up the mishap, it will also help to avoid any potential legal action that may arise from the overpayment.

If you cannot pay what is owed, the federal government does have special privileges compared to a regular creditor and you are at risk of having any other government benefits withheld from you such as Employment Insurance, HST/GST cheques and further CERB payments.

Q: Are there any legal risks such as fines or charges that may be a result of a CERB overpayment?

A: There may be a risk of legal penalties if the CERB overpayment is found to be the result of fraud. The federal government had introduced Bill C-17, which if passed, would have resulted in penalties such as fines or jail time if someone is found guilty of fraud. Applicants may be subject to a penalty if they:

  • Provided false or misleading information;
  • Knowingly failed to declare some or all their income;
  • Made a representation that they knew was false or misleading;
  • Made an application or declaration that they knew was false or misleading; or
  • Knowingly received an income support payment that they were not eligible to receive.

While Bill C-17 has not been passed, if you feel like you may have provided false or misleading information when applying for the CERB or were mistakenly given a payment, we recommend discussing your situation with a lawyer or contact a member of our team to discuss your financial situation.

Q: What are the possible impacts on my 2020 income tax return?

Your CERB amounts are taxable given that taxes were not deducted when initially paid to you. If you return CERB overpayments in full to the government before December 31, 2020 there is no impact on your 2020 income tax return.

If you are unable to repay the amount of the overpayment in full before December 31, 2020 you will need to report the amount as income for the 2020 income tax year. T4A slips will be issued for the full amount and are to be included when filing your 2020 income tax return.

Q: I’ve received a call/text message from someone claiming to be from CRA requesting information, should I provide it?

It is essential to always be aware of possible fraudulent emails, texts or calls claiming to be from CRA. Whether requesting personal information or referencing a CERB overpayment, it is best to hang up, or do not respond to text or email and initiate your own communication. The CRA website that provides some suggestions on how to protect yourself against fraud.

Err on the side of caution when it comes to your personal information if you are unsure who you are communicating with online, over the phone or through text.

Q: I’ve received notice of a CERB overpayment but cannot afford to pay it. Can bankruptcy or a consumer proposal help me with this debt?

A:  The government has not changed the legislation to indicate that these overpayments will be treated any differently than any other debt. As the CERB overpayments, to date, are classified similarly to CRA income tax debt, they may be able to be included in an insolvency proceeding.

If you are considering a bankruptcy or consumer proposal as a means to pay back your CERB overpayment, please reach out to our team for advice. One of our debt solution professionals can assist you in managing your monthly budget and provide further guidance on how to navigate your debt and other financial commitments.

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