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CERB Repayment – What to do if you Can’t pay it Back?

Like many Canadians that received the Canadian Emergency Relief Fund, you may have got a letter from CRA asking for a payment of the outstanding amount.

Do you owe income tax on your 2020 tax return because you received CERB and didn’t actually qualify for it?

There are three reasons why someone may have to pay back CERB:


You received a double payment:

Individuals who applied for benefits through CRA and Service Canada and received payments from both would have received a letter from CRA advising that a repayment would be required.


You did not earn enough income to qualify to receive CERB:

To qualify for CERB, individuals were required to earn at least $5,000 in 2019 or in the 12 months prior to applying for CERB.  Initially, there was much confusion over what income sources counted as “income” in this context.  For example, pensions, disability benefits, student loans, social assistance and Employment Insurance were not considered to be employment or self-employment income for this purpose.  In addition, there was confusion over whether the self-employment income amount was the gross or net income amount.  The Government of Canada recently clarified that those self-employed individuals who had at least $5,000 in gross self-employment income in 2019 won’t be forced to repay CERB funds received. 


You did not file your 2019 tax return:

If you didn’t file your 2019 tax return, CRA may not be able to verify your income for that year.

CERB payments are considered taxable income.  However, no taxes were withheld, which may result in your owing taxes when filing your 2020 tax return.

If you received CERB payments but it was determined that you were ineligible to receive them and you did not pay them back by December 31, 2020, you will still need to pay the income tax due on those benefits, again, which could result in a balance due to CRA.

The Government of Canada has announced that it will be providing interest relief to Canadians who received COVID related income but had less than $75,000 of taxable income in 2020.  These Canadians will have no interest charges on 2020 tax debt until April 30, 2022, thus giving some breathing room to get caught up.

What if you can’t pay your tax debt? 

There are two legislated options to deal with your debts, including funds owed to CRA for income tax: bankruptcy and consumer proposal.  Both of these options are legislated by the Bankruptcy and Insolvency Act and are the only options available that allow you to discharge the debt. Only a Licensed Insolvency Trustee is able to provide these options to the public. 

To find out more about these options, contact D. Thode & Associates Inc. today to speak with one of our professionals about your situation and which option may suit you best.

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