Editor’s Note: This post was originally published in July 2020 and has been completely revamped and updated for accuracy and comprehensiveness as of March 15, 2021. 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 been given money incorrectly and may have been notified of a CERB overpayment.
An increasing number of Canadians are seeing letters from the Canada Revenue Agency (“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 might have been a mistake regarding your CERB payment, and you must now 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 period in question, i.e.:
- You applied for CERB but 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 repayment of 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 has special powers and you are at risk of having other government benefits withheld from you, such as Employment Insurance, HST/GST cheques and further CERB payments.
Note: The Government of Canada has announced that the CRA will not withhold GST/HST credit cheques or the Child Tax Benefit from anyone who has income tax debt related to a pandemic relief benefit such as the CERB. Learn more on the CRA’s update on pandemic-related income tax debt relief.
Q: Are there any legal risks such as fines or charges that may result from a CERB overpayment?
A: There may be a risk of legal penalties if the CERB overpayment is found to have been 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: I heard self-employed individuals may not have to pay back their CERB overpayment. Is this true?
Originally, Canada Revenue Agency told self-employed individuals that to qualify for CERB, they would need to have at least $5,000 in income in the prior year. At some point, the CRA clarified that the $5,000 income requirement was “net income”. The difference between these two is significant, since “net” income refers to your income after you pay all the expenses necessary to run your business. This change in CRA scripting means that many self-employed Canadians were approved for CERB when they were “not eligible”.
In early February 2021, the CRA announced that self-employed individuals who applied for CERB and would have qualified based on their gross income will not be required to repay their overpayments, provided they also meet all other eligibility requirements. This will apply to qualified individuals who applied through either the Canada Revenue Agency or Service Canada.
Q: What are the possible impacts of receiving CERB benefits on my 2020 income tax return?
Your CERB amounts form part of your taxable income and must be included when calculating your income taxes for 2020 even though taxes were not deducted when initially paid to you. If you are not self-employed and received CERB, you will receive a T4 slip from either the CRA or Service Canada and you must claim the CERB as income in 2020.
In early February 2021, the CRA announced they will be providing targeted interest relief to recipients of the CERB and other pandemic-related income support benefits. This means that if an individual qualifies for the program and they have filed their 2020 income tax and benefit return, they will not be required to pay interest on any outstanding income tax debt, including CERB overpayments, for the 2020 tax year until April 30, 2022.
Q: I am not self-employed but have received a notice of a CERB overpayment. What implications will this have on my 2020 income taxes?
For individuals who received CERB payments when they were not eligible and made a repayment towards the amount owed, any amounts repaid to the CRA or Service Canada prior to December 31, 2020 will appear as a deduction on your 2020 T4A or T4E slip. Any CERB repayments received by the CRA after December 31, 2020 will be reported on a 2021 T4A slip issued in 2022 and will be a deduction on your 2021 personal tax return.
Read more on the CRA’s targeted interest relief program.
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 callers claiming to be from CRA. Whether they are 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 provides some suggestions on how to protect yourself against fraud.
Err on the side of caution when it comes to sharing your personal information if you are unsure who you are communicating with online, over the phone or through text. Do not make payments to anyone claiming to be CRA without ensuring that you are indeed making the payments directly to CRA. CRA does not accept gift cards, Bitcoin, and other such forms of payment.
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 income tax debt, they are included in an insolvency proceeding.
If you are considering a bankruptcy or consumer proposal as a means to deal with 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.