Incorrect T4A’s for CERB Recipients Report Repaid Benefits as Taxable Income

Beth Graddon

In any already complex tax year for many taxpayers who claimed COVID-19 income support benefits, there’s another complication being added to the mix. Last week, the CRA confirmed that some taxpayers who repaid benefits they were not eligible for in 2020 have received tax slips that incorrectly include portions of the repaid benefits as taxable income.

This is an unfortunate outcome, particularly considering taxpayers were urged to repay by December 31, 2020, even though it was not mandatory, in order to avoid this exact result.

As you may recall, last year the CRA reassured taxpayers that repaid amounts would not appear on their T4A’s as taxable income, provided they repaid by the end of 2020. The repaid amounts were to be subtracted from the benefits amounts recorded.

But last week, while putting a bright spin on things, the government reported  a “rare error”:   the repayments were credited to a taxpayers T1 instalment account, instead of their emergency  benefit account.  This will cause a whole lot of inconvenient consequences for taxpayers during an already complicated tax season.

For example, taxpayers who have experienced this outcome have the option of contacting the CRA at 1-800-959-8281 to fix incorrect tax slips and have repayment amounts applied to the correct accounts. However, they must be prepared to spend hours on the phone to get through. The CRA has also promised to adjust these proactively and re-issue correct T4As to those affected.  This puts the onus is on the taxpayer to determine which T4A  is correct and to they’ll have to be careful to avoid reporting the income twice.

With all this in mind, responding proactively is  a wise course of action for taxpayers.  In fact, this may be a good reason to see a tax specialist early in the tax season.   A couple of steps to take:

• First, taxpayers should double-check with their financial institutions that repayments were correctly submitted and received by the CRA.
• If the repayment was submitted and received, then reach out to the CRA as soon as possible to ensure that a revised T4A is received well before the April 30 tax filing deadline for individuals. Or ask a tax specialist to do this for you.

Additional educational resources: With all the nuances this unusual tax season brings, now is the right time for tax specialists to enhance their staffing and  ensure their team is up-to-speed on all the tax implications of the COVID-19 emergency response benefits. Knowledge Bureau’s certificate course Advanced Tax Update & Pandemic Course can help.

This month only, you can take advantage of a special tuition offer: take an enhanced certification program that includes 2 Certificate Courses for $995  We are commemorating St. Patrick’s Day with the code: ‘21LUCK’; please use it to enrol in this option by the March 31, 2021 deadline.