CERB Audit Tip

Evelyn Jacks

As CERB income reporting begins in earnest on the 2020 tax return, Canadians and their advisors are scrambling to confirm eligibility for amounts received last year and if required, to repay amounts received in error.  However, a number of questions have arisen around the grey areas of eligibility.  A common one surrounded eligibility for individual recipients of dividends from family businesses.

Recall that eligibility for CERB included this list of criteria;  the individual must have:

• Resided in Canada and be at least 15 years old
• Have a valid Social Insurance Number
• Have stopped working because of COVID-19 or is eligible for Employment Insurance regular or sickness benefits
• Had income of at least $5,000 (net income after expenses in the case of self-employed people) in 2019 or in the 12 months prior to the date of application
• This income could have come from any or a combination of the following sources:
  • Non-eligible dividends (dividends out of corporate income taxed at the small business rate).
  • Eligible dividends (those paid from public corporations or those taxed at higher general rates won’t count for these purposes).
  • Maternity and parental benefits under the Employment Insurance program and/or similar benefits paid in Quebec under the Quebec Parental Insurance Plan. If work is not available as a result of reasons related to COVID-19 upon conclusion of the maternity/parental leave, it is possible to apply for the CERB if other eligibility criteria are met.
• Note that the $5,000 does not need to have been earned in Canada
• Workers who are not Canadian citizens or permanent residents, including temporary foreign workers and international students, may also be eligible if the other criteria listed here are met.
• Applicants must have been or expected to be without employment or self-employment income for at least 14 consecutive days in the initial four-week period

Advisors who participated in the recent January 20 CE Summit were curious whether there was any stipulation that a shareholder’s eligibility for the CERB be tied to the income level of a small business corporation? Or, was the intent of the rules to assess CERB eligibility based on the individual’s income level only?

The response we have received from CRA is that there is no such stipulation.  The other than eligible dividends will qualify as self-employment income for the purposes of the CERB as noted  on this Canada.ca FAQ page: https://www.canada.ca/en/services/benefits/ei/cerb-application/questions.html#income-requirements

CERB benefits will be shown in Box 197 of the T4A slip and will be reported on line 13000.  For those who missed the January CE Summit, which focused on all the changes to the 2020 tax return, the course is still available online, together with all the recordings.  Register online or call us at 1-866-953-4769 for personal assistance.