CERB Repayments & Tax Time Confusion

Evelyn Jacks

Expecting a tax refund or GST/HST payment?  You may not get it if you owe money to the Canada Revenue Agency (CRA), including repayments of the Canada Emergency Response Benefit (CERB) and other pandemic supports you may have received.  Here is what you need to know and why contacting the CRA is so important to get on better financial ground in 2024:

The Backdrop.   Canada Emergency Response Benefit Programs received by Canadians from CRA or  included the following:

• The Canada Emergency Response Benefit (CERB) – not taxed at the source
• The Canada Emergency Student Benefit (CESB) – not taxed at the source
• The Canada Recovery Benefit (CRB) which replaced the CERB program – taxed at the source
• The Canada Recovery Sickness Benefit (CRSB) - taxed at the source
• The Canada Recovery Caregiving Benefit (CRCB) – taxed at the source

The income information was provided to taxpayers on T4A slips for inclusion on  line 13000 of their 2020 tax return. These slips however were not statements of repayment for those who may have received benefits they shouldn’t have been entitled to.  A different process was required and that’s important because people who repay any of these benefits are entitled to a refund of income previously reported.

Repayment confusion.    Who should be repaying? To begin, as described, some initial benefits did not have tax withheld at source.  In other cases, despite tax being withheld at the source, some Canadians who received the CRB, CRSB, and CRCB may still have a tax balance owing upon filing their tax returns and that is where repayment issues for some Canadians began.

But in other cases, the pandemic supports were simply received – and kept - in error.  CRA provided some examples on their website; for example, the taxpayer may have:

• Earned more income than expected during the time the CERB payment was receive
• Applied for and got the CERB from both EI/Service Canada and from the CRA for the same eligibility period
• Applied for the CERB but later realized they were not eligible (see eligibility criteria below)

If COVID-19 benefits were received in error or the eligibility criteria was not met, taxpayers must repay the full amount of payments received.  Individuals who intentionally made fraudulent claims may face additional consequences, according to the CRA.

The CRA also admitted to contributing to CERB eligibility confusion for small business owners over a $5,000 income requirement in the year before the pandemic.  Many small business owners interpreted that to mean $5,000 in gross income,  when in fact the stated the eligibility should have been based on net income – meaning many who received it should not have qualified.

The government later issued a statement acknowledging that unclear instructions were provided, and the National President of the Union of Taxation Employees (which represents CRA employees) indicated that CRA agents and the CRA website have both incorrectly stated that the eligibility requirement was based on $5,000 gross income.

The government eventually accepted both, but some taxpayers will have repaid their CERB anyways and that meant that they qualified to get a tax deduction for the repayment. Many taxpayers missed that and are actually owed money by the CRA.

Next time: What happens on the tax return?