CRA Announces Tax Debt Relief

Beth Graddon

Kudos to the CRA. They may just have heard your feedback on our January poll where the vast majority of advisors suggested that the CRA should cut people some slack.  Yesterday they did, with the announcement that interest relief would be available for taxpayers who made under $75,000 and received pandemic support benefits in 2020. There is more good news, too, for refundable tax credit recipients.

Pandemic Benefit Tax Debt Relief

Interest owing on any outstanding income tax debt for the 2020 tax year will not apply until April 30, 2022. However, 2020 tax returns must be filed for taxpayers as usual to be eligible.:

To qualify for this targeted interest relief, individuals must have had a total taxable income of $75,000 or less in 2020 and have received income support in 2020 through one or more of the following COVID-19 measures:

• Canada Emergency Response Benefit (CERB)
• Canada Emergency Student Benefit (CESB)
• Canada Recovery Benefit (CRB)
• Canada Recovery Caregiving Benefit (CRCB)
• Canada Recovery Sickness Benefit (CRSB)
• Employment Insurance benefits
• Similar provincial emergency benefits

The Canada Revenue Agency will automatically apply the interest relief measure for individuals who meet these criteria.

Important Note:  this does not imply tax relief for those who did not receive pandemic support benefits.  These taxpayers will still have to pay interest on tax debt as usual.

And for those who received pandemic benefits they were ineligible for but did not make these repayments to the government in 2020, it’s also important to note this will also need to be reported when filing this year as it appears on T4As. However, if repaid in 2021 adjustments will be made when filing for this tax year in by April 2022.

In other good news, CRA-administered refundable credits and benefits normally paid monthly or quarterly, such as the Canada Child Benefit and the Goods and Services Tax/Harmonized Sales Tax Credit will not be applied to reduce individuals' tax debt owing for the 2020 tax year.

It’s really important to file tax returns on time by the tax filing deadlines (April 30 for individuals and June 15 for proprietors) to ensure these  benefit payments continue without interruption.

Bottom line:  Good on the CRA for providing interest-rate relief to people whose economic circumstances changed due to the pandemic.   

Additional educational resources: Ahead of a complex tax season, get up-to-speed and train your team with the Advanced Personal Tax Course for 2020 returns.