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Do I have to repay CERB?

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If you're concerned about whether you must repay CERB, learn about what steps you can take.

Many Canadians who applied for and received the Canadian Emergency Response Benefit (CERB) felt blindsided when the Canada Revenue Agency (CRA) sent out more than 441,000 letters in 2020 to CERB recipients asking them to confirm they met the program’s eligibility rules.

While CERB only ran until October 2020 and was replaced at that time by the Canada Recovery Benefit (CRB), the CRA is still confirming whether some individuals meet the eligibility criteria.

The main issue centred around eligibility criteria for self-employed individuals and whether they met the $5,000 earnings requirement in the previous year. The initial launch of the CERB program did not stipulate whether the $5,000 was net or gross income.

Nearly nine million Canadians received the $500 per week CERB payments between March and September of 2020 as the federal government stepped in to help individuals and businesses who were affected by the Covid-19 pandemic.

Did you receive money from the CERB program and are now wondering if you will be forced to repay CERB? Keep reading to learn what you need to know, including how to repay CERB.

Did the CRA ask you to repay CERB?

A notice from the CRA may trigger anxiety, but in this case, the Canadians who received letters were simply being asked to double-check their eligibility for CERB. The agency says receiving a letter doesn’t mean you have been determined ineligible, but rather that they don’t have the necessary information to confirm your entitlement.

What if you can’t repay your benefits right away? The CRA has made it clear it won’t force you to repay immediately if you don’t have the money – it’s simply putting you on notice that you may not have met the eligibility requirements.

The government rolled out the CERB program with a “trust-then-verify” approach, emphasizing the speed of payments over time-consuming eligibility checks. The plan was always to circle back and verify eligibility before Canadians filed their 2020 tax returns, and to continue checking eligibility as needed moving forward. That’s what’s happening now.

Indeed, nearly one million CERB “re-payments” have already been made from Canadians who realized they were ineligible for the benefit or did not need the income once their financial situation settled.

Net or gross: What is the $5,000 earnings requirement?

The initial eligibility criteria for CERB stated that recipients must have earned at least $5,000 in 2019 (or in the 12 months prior to applying). The CRA interpreted this as gross income for regular salary or hourly employees, but as net income for self-employed workers.

The problem is that distinction wasn’t spelled out during the application process. Everyone seemed confused: from the self-employed individuals applying for CERB to Members of Parliament to even CRA’s own agents. Yes, it even appears the CRA provided incorrect information to CERB recipients at the time of application and quietly updated its own website to add eligibility information that was not initially available.

Possible CERB eligibility solutions

When news broke of the CRA letters and confusion over self-employed eligibility requirements, some media outlets and tax experts suggested that affected Canadians simply amend their 2019 tax return and remove some allowable deductions to increase their net income above the $5,000 threshold.

Don’t do this.

Amending 2019’s return may cause a ripple effect of unintended consequences. Even if the adjustment is accepted by the CRA, it could potentially trigger the loss of other benefits as well as interest and possibly penalties. Filing the adjustment itself might lead to unpleasant reviews and audits.

Instead of only looking at 2019’s net income, CERB recipients can also qualify using their income over the 52-week period prior to application.

Verifying that you haven’t earned more than $1,000 during CERB claim periods

Canadians have reported that as recently as January 2022, the CRA is still issuing letters to Canadians who have claimed CERB, but these most recent letters relate to how much you earned during your CERB benefit period. In these letters, the CRA is concerned that people may have earned more than $1,000 during the periods in which they claimed CERB.

To remedy the situation, the CRA is asking Canadians to provide proof of their earnings during CERB periods. This proof could include bank statements, pay stubs, and a letter from your employer confirming your income and when you earned it. In some cases, you may also be required to submit an amended T4 that breaks down your income by the CERB benefit period.

If you have received a letter relating to your self-employment income or the income you earned during your CERB benefit period, you’ll need to prove your eligibility. If you find that you’re not eligible and you don’t have the money to repay the CERB, it’s best to wait until you file your 2021 tax return and see what kind of relief might be available at that time. No one is going to force you to repay right away.

The federal government has said it will not be offering debt relief to CERB recipients who applied in good faith but who are now deemed ineligible. The one silver lining is that the CRA has said it won’t be charging interest on CERB repayments.

What if you haven’t received a letter? All good?

Again, using the “trust-then-verify” approach, the CRA will contact people if they need to repay. The letters that were issued arrived online – so check your “MY CRA Account” to be sure.

If you haven’t received a letter, then it looks like you’re in the clear.

One more note: Of the letters that went out from the CRA in recent weeks, not all of these individuals will have to repay their CERB. They’re asking you to confirm your eligibility. If you have documentation to prove that you were eligible, then it’s best to gather it and give the CRA what it needs to confirm your eligibility.

But what if I have to repay CERB and I don’t have the cash? What are my options?

So it turns out you’re not eligible and you have to repay the CERB. Okay, so what next?

Whatever you do, don’t ignore the problem. The first step is to contact the CRA and work out a payment plan. The CRA treats payments the same way it would treat outstanding tax bills, which means there is a system in place for Canadians who cannot pay.

The CRA allows you to repay your tax debt over up to five years until it is paid in full. Check CRA’s online Payment Arrangement Calculator to help you figure out how much you can afford to pay and how long it will take to pay off your tax debt.

With historically low-interest rates, you could also consider getting a personal loan or a line of credit to pay off the debt. If it’s a bigger chunk of change to pay off, you could leverage your home equity and refinance your home. An online mortgage broker like Breezeful uses bespoke technology to help refinance your home and match you with the most competitive interest rates possible.

Just don’t panic. Even the Prime Minister is telling you to chillax.

Final thoughts

The possibility of having to repay your CERB can be extremely unsettling, especially in the midst of a second wave and the potential need for even more government support to get us through this difficult time.

Nearly nine million Canadians applied for and received the CERB. Of that, 441,000 people received letters at the end of 2020 from the CRA asking to verify their eligibility, and now, thousands more are receiving letters. Many of those will be asked to repay their benefits. Nearly one million Canadians already repaid their benefits prior to these letters going out.

If you’re worried about having to repay your CERB, double-check your eligibility.

Tread very carefully at the idea of filing an adjustment to your 2019 tax return as doing so could cause major unintended consequences.

Use a tax software provider that has an excellent package for self-employed individuals, to verify your deductions, maximize your tax savings, and determine your eligibility for CERB (plus other benefits and credits).

Know that the federal government likely won’t back down on asking for repayment for those who were deemed ineligible, but they also won’t be charging interest on the amount you’re required to pay back.

Robb Engen is a leading expert in the personal finance realm of Canada and is also the co-founder of Boomer & Echo, an award-winning personal finance blog.


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