CERB Repayment

CERB Repayment Letter – What Happens Next?

The Canada Emergency Response Benefit (CERB) was designed to help those that lost their jobs or had their household income reduced due to the Covid-19 Pandemic. When it was first introduced the government’s intent was to provide financial relief to those that needed it as quickly as possible. As such during the initial application process, there were few details provided around qualifications. In fact, there were even some qualifications that were altered as the application process continued.

Because of this thousands of Canadians who applied for the benefit may have wrongly received it and now the government has sent out letters to over 400,000 Canadians requesting the repayment of CERB overpayments.

Reasons for CERB Repayment

If you were 1 of the over 400,000 Canadians that received this educational letter, you likely received it for one of the following reasons:

  • You received double CERB payments from both Service Canada and the Canada Revenue Agency (CRA)
  • You earned more than the allowable amount while receiving CERB benefits
  • You did not earn the minimum income that was required to qualify for CERB

Double CERB Payments

Due to the high volume of applications during the initial stages of the Pandemic, individuals were able to apply for benefits either through Service Canada or through the Canada Revenue Agency. If you applied through both and received two CERB payments, the CRA has issued a clear notice demanding repayment of one of the payments you received.

Exceeded Allowable Income Allowed

One of the reporting requirements while receiving CERB was that individuals were only allowed to earn a maximum of $1,000.00 for each 4 week reporting period. If you earned more than this you did not qualify. The CRA is asking those that received CERB but earned more than the maximum amount to make a repayment.

Ineligible Due to Not Meeting Income Requirement

To be eligible for CERB the requirement was you must have earned employment or self-employment income of at least $5,000 in 2019 or in the previous 12 months before applying. To verify this income the CRA will be relying on your 2019 income tax return and a combination of other tax slips they might have on hand.

Confusion has arisen as to whether the $5,000 represented gross income or net income after business expenses.

In the initial stages of the application process, the minimum income qualification for self-employed individuals was based on gross income, later in the application process, this changed to net income. Although this may seem like a small change, it resulted in many Canadians receiving CERB when in fact they might not have qualified.

Another point of confusion when individuals were applying was what income was considered eligible income. The following types of income are not considered employment or self-employment income and are not used when determining if you meet the minimum income requirement:

  • Pension Income
  • Disability Income
  • WCB Income
  • Student loans and bursaries
  • Family support payment
  • Social Assistance
  • Employment Insurance Benefits (EI)
  • Wage Loss Supplements
  • Canada Child Benefit (CCB)
  • Working Income Tax Benefit (WITB)
  • Investment Income

The Canada Revenue Agency: Where Do They Stand?

The Canada Revenue Agency clearly indicated that they plan to verify the CERB benefit and request repayment for those that received it when they might not have qualified. However, they have also indicated that they understand that many who applied incorrectly did so honestly and did so without the intent to defraud them.

As a Bankruptcy or Consumer Proposal does not discharge debts that arose due to misrepresentation or fraud, in our opinion this is a positive sign that the CRA will likely decide to accept most CERB debt as dischargeable in either a Bankruptcy or Consumer Proposal. However, this may not be the case for all CERB debt and the CRA may also make a decision if the debt is dischargeable on the merits of each individual case.

As of December 31st, 2020 the CRA does not seem to be commencing with any collection action. Instead, they have taken the approach of sending letters to individuals requesting voluntary repayment from individuals that did not qualify or received double payments. This should not be taken as the CRA will never garnish to recover these funds and this might only be a temporary approach.

What Should I Do?

Depending on what the letter received from the CRA is requesting the following options are available:

  1. If you know your earned income is sufficient to qualify for CERB and you simply haven’t filed your income tax return for 2019, the simplest solution is to file your return.
  2. If you were self-employed and your net income was below $5,000 but your gross income was above $5,000 talk to your accountant or bookkeeper about the possibility of amending your income tax return.
  3. If you know you received CERB but did not qualify, and you have the necessary funds available, you can repay CERB (the full amount), either online, through your MY CRA account or VIA mail.
  4. If you need additional time to pay back CERB as you don’t have the funds currently available, you can Contact the CRA and speak to an agent and arrange to make a repayment plan with them. If choosing this option, remember to ensure that any repayment plan you enter into doesn’t stretch your budget too thin.
  5. Consider a Consumer Proposal: If you cannot afford to repay the full amount, but can afford a small monthly payment, talk with a Licensed Insolvency Trustee about your specific situation. For more information on Consumer Proposals see our blog: Is a Consumer Proposal Right for Me?
  6. If you cannot afford to repay the full amount, talk with a Licensed Insolvency Trustee about your specific situation. For more information on Bankruptcy see our blog: 3 Reasons Bankruptcy Could be the Right Choice

Contact Us – We Are Here to Help

At Chase & Associates, we offer a free initial consultation so it will cost nothing to reach out to one of our experienced staff members. We will meet with you in person, over that phone or over video conference to discuss any and all options available to you.

Len Hiquebran, CPA, CA, LIT

After completing my articling at a local accounting firm, I spent some time working in industry as a controller of a logging company. Subsequently, I joined Derek L. Chase & Associates Ltd. in 2017 and began working in the insolvency field. In June 2020 I completed my studies and was granted a license by the Federal Government to be a Licensed Insolvency Trustee.