Introduction – Do self-employed Canadians have to repay?
Canada Emergency Response Benefit?
Recently the Canada Revenue Agency (CRA) issued over 650,000
Letters to many self-employed Canadians regarding repayment of
the Canada Emergency Response Benefit (CERB). especially the
CRA focuses on contacting CERB recipients for whom this is not possible
confirm (1) employment or (2) net income from self-employment of at
Earned at least $ 5,000 in 2019 or in the 12 months prior to applying to
CERB, one of the CERB admission criteria. The CERB
Providing up to $ 14,000 in financial assistance to employees and
self-employed Canadians directly affected by COVID-19
Pandemic.
The letters from CRA are said to be "educational". On
On the one hand, the letters from CRA indicate that they are self-employed
CERB recipient, the "qualified income had to be net before tax
Income. "In this context, net pre-tax income means gross
Income minus expenses. On the other hand, these letters ask
CERB recipients for certain information to determine whether (or
not) they met the income eligibility criteria for the benefit
Program. As a result, many self-employed Canadians are concerned
about whether or not they have to repay CERB. in the
especially self-employed Canadians who have applied to CERB
their gross earnings reported less than $ 5,000 in net earnings
fear they may have to repay up to $ 14,000
of advantages.
According to the CRA, the letters should "explain"
What counts as Earned Income to be eligible for CERB and what?
not "and they should not be interpreted" as
Determination of whether (or not) were CERB recipients
"considered ineligible" for performance. Still, it's obvious
A review of the CRA website shows that the wording is in CERBs
Online application and admission criteria didn't make it clear
Entitlement to the benefit was based on net income. in the
In addition, although CERB is no longer available, its application
The validation page is still online where this additional is mentioned
Documents required to validate the taxpayer's CERB application must be
were made available to the rating agency by December 7, 2020. While the CERB
The application validation page does not disclose the consequences for
Taxpayers missing the December 7, 2020 deadline, it says
that under certain circumstances is the verification of information
required to process the application. In this context it is likely
that taxpayers who fail to meet the deadline of December 7, 2020 for
Submitting additional information is likely to be considered ineligible
apply to CERB and their application process
incomplete.
In addition, the rating agency encourages CERB recipients who have not done so
meet the eligibility criteria to repay all amounts for which
You did not qualify by December 31, 2020. Nevertheless, the rating agency stated
that December 31, 2020 is not a set repayment period for
CERB. According to CRA CERB recipients who repay it afterwards
December 31, 2020 is taxed at the full benefit amount
received in 2020. For example, a self-employed CERB recipient who
Repayments in January 2021 will have to pay income tax
on the amount repaid once he or she has filed their 2020 income tax
returns. All taxes paid on a taxpayer's income in 2020
The tax return for CERB amounts that have already been repaid will be adjusted in
Income tax return of the taxpayer 2021. This means that CERB
Repayments in 2021 will allow taxpayers to: a
Deduction on your 2021 income tax return. According to the CRA
Canadians who applied to CERB in "good faith" and are
later required to repay it, will not be fined or
Interest.
However, there are still concerns about the repayment of
CERB. As such, if you have a letter from the credit rating agency regarding the
When repaying CERB, it is highly recommended to contact one of
our certified tax professionals canadian tax attorneys for
appropriate tax advice.
The concerns related to the repayment of CERB
CERB repayment requests reflect the ongoing efforts of CRA
Protect Canadians from fraudulent benefit claims and
Failure to Comply with and Ensure Compliance with Canadian Taxes
System. However, there are significant issues related to
CRA's approach to repaying CERB. First, there is a clear loophole
between the words used in CERB's online application and
Approval criteria of the rating agency and their interpretation
Canadian. The rating agency should do this when designing the service program
acknowledged the fact that a layman who has no tax knowledge
Matters is likely not to understand the meaning of net income or
Self Employed Income under Canadian Income Tax Act. in the
Plus the fact that the CRA is issuing letters to explain
Self-employed CERB recipients, what counts as earned income, when
The benefit is no longer available and is problematic. That seems to be the case
suggest that the CRA recognize the fact that CERB
The application overlooked important information for its authorization
Criteria and now the CRA is trying to correct its mistakes.
The application and admission requirements of CERB should be met
has been clearly defined since the start of the program in March 2020
and should have clear definitions for net income and contain
Income from self-employment. In particular, the CERB application
have asked independent applicants to indicate their gross amount
Income, expenses and net income and it should have
clearly stated that when an applicant's net income is less
than $ 5,000 (in 2019 or the 12 months prior to applying to CERB) he
or she is not entitled to the benefit.
Second, income tax liability can motivate many Canadians
CERB to be repaid by December 31, 2020
The COVID-19 pandemic created a lot of uncertainty and thus many
Canadians do not have the funds to repay CERB, some of which
are not sure how or when they will pay it back. As such, the
Income tax will be levied on repayment of CERB after December 31, 2020
Liability for many Canadians, especially the self-employed
Receiver. Imposition of an income tax liability on CERB repayments
made after December 31, 2020 shows how the Canadian
The government ignored the fact that there are many Canadians
unemployed due to the ongoing COVID-19 pandemic, most of whom are doing so
You don't have up to $ 14,000 to repay CERB. Accordingly, CERB
Recipients who do not repay it by December 31, 2020 will be
likely to be additionally burdened with the income tax liability
the repayment amount. In addition, CRA refers to
Eligibility of taxpayers to request a deduction for their year 2021
The income tax return is also problematic (for CERB, which was repaid in 2021)
because it overlooks the fact that some Canadians also can't be
able to repay CERB in 2021, in this case their refunds
will be further delayed. This shows the need for utility
Programs that have clear admission requirements and are realistic
Expectations from all Canadians.
Third, as stated earlier, the CRA stated that Canadians
who have applied to CERB in "good faith" and are subsequently
There are no penalties or interest associated with repayment.
However, this raises questions about Canadians who have applied
for CERB in good faith and have to repay it later, however
don't have the funds to repay. In particular, will
Canadians who cannot repay CERB for two to three years are at the door
Penalties or Interest? In addition, this raises questions
Penalty and Interest that Canadians may be charged
who are unable to pay the income tax levied on CERB repayments
made after December 31, 2020. It should be noted that the
"Request for tax relief – cancel or repeal penalties and
Interest "(Form RC4288) (formerly known as Fairness)
Application) is a viable option for Canadians with a tax liability
consisting of potentially high interest and penalties,
including those resulting from receiving CERB. As such, if it is you
consider filing a request for tax relief to cancel or waive
potential interest and penalties resulting from receiving CERB, you
can contact one of our certified tax specialists in Canada
Tax attorneys for appropriate tax advice.
Fourth, according to the CRA, the government of Canada
Communication was "unclear" when CERB was first used
Introduced to Canadians. The rating agency admitted that there was a shortage
the clarity between the CERB websites and the information and
Instructions to the CRA call center agents (from the
Government of Canada) on CERB eligibility. Hence CRA
Agents provided Canadians with false information, including this one
CERB's eligibility criteria were based on gross income rather than net income
Income. The CRA stated that the "lack of consistency
Clarity "between the information it received from the Canadian
Government and the wrong information they (the CRA) provided
Canadians mistakenly led to some self-employed taxpayers
apply to CERB even though they are not eligible for the benefit. These
is problematic because it appears that the rating agency is trying to change
the focus away from its own mistakes and omissions on the government
from Canada. The rating agency is responsible for administration and enforcement
the Income Tax Act and must therefore acknowledge its mistakes and
Omissions and ponder how his wrongdoing can create financial consequences
Need for Canadians. Even if the CRA is correct and that it is
The agents received the wrong information about the CERB entitlement
Criteria and these agents relayed such false information
Canadians, or taxpayers, shouldn't have to pay for the mistakes
CRA and / or Canadian Government Omissions.
There are still concerns associated with the repayment of CERB
including, but not limited to, eligibility determination
Criteria and possible effects on income tax. this shows
the need for a carefully crafted and precisely crafted benefit
Programs that contain clearly defined terms and eligibility
Criteria. The rating agency must take responsibility for its misinformation
and misdirection in the CERB application and authorization
Conditions. In particular, the rating agency should also be held
responsible for the failure to establish a clear income threshold
Requirements and definitions accordingly. In addition, the Canadian
The government should take into account the application and eligibility of CERB
Criteria that were set in at the beginning of the program
March 2020, not after the program is no longer available.
How Self-Employed Canadians Can Avoid CERB Repayment?
Self-employed CERB recipients who have submitted their T1 individual for 2019
Income tax returns with gross income greater than $ 5,000 but net
Income under $ 5,000 can change these returns by filing a T1-ADJ form
whereby they can reduce the claimed costs in order to increase their net profit
Income over $ 5,000 to meet CERB eligibility
Threshold. However, this can lead to some CERB recipients
If they potentially have a tax debt, this should qualify them
for CERB and be able to avoid repayment. The key is that during
Canadian taxpayers must report any income they do not have
obliged to claim expenses for their income tax return. Such as,
CERB recipients should be able to change their 2019 income tax
return to be eligible for CERB and avoid repayment
it.
As already mentioned, one of the admission criteria of CERB
is: Earned work or self-employment income of at least $ 5,000
in 2019 or the 12 months prior to applying to CERB. In addition to
Canadians must meet the following requirements to qualify for CERB
Conditions:
- An applicant has not applied for or received a CERB or EI
benefits from Service Canada for the same eligibility period; - An applicant did not voluntarily quit his job.
- Must be present in Canada;
- Must be at least 15 years old;
- One of the following conditions applies:
-
- Working hours were reduced due to COVID-19;
- The employment was stopped due to COVID-19.
- The applicant cannot work because of COVID because he or she is
take care of another person; or, - The applicant received at least one EI or fisheries benefit
Week of benefits since December 29, 2019 and have consumed his or her
your entitlement to these benefits.
- One of the following conditions applies:
-
- Applicants applying to CERB for the first time: must have
stopped working or working hours were reduced due to COVID-19, and
other than earning over $ 1,000 in employment or
Self-employed income (before deduction) for at least 14 days in
one series during the 4 week period; or, - Applicants who apply to CERB for a later period: Applicant is
still does not work or works fewer hours due to COVID-19 and
does not expect to earn more than $ 1,000 in jobs or
Self-employed income (before deduction) and expects this
Continue for the 4 week period.
- Applicants applying to CERB for the first time: must have
In summary, the CERB applicant must meet one of the above conditions
Criteria. As such, self-employed Canadians must have earned at
at least $ 5,000 in 2019 or in the 12 months prior to applying to CERB. in the
In this regard, the net income can be up to the date of
CERB application that would include revenue generated in 2020.
Alternatively, a self-employed Canadian can submit Form T1-ADJ for amendment
their 2019 income tax return to cut expenses
claimed and increased their net income to over $ 5,000 to achieve that
CERB admission threshold. However, it is not clear that the CRA
Criteria are supported by legislation.
The COVID-19 Emergency Response Act
In March 2020, the Canadian government introduced the COVID-19
Emergency Act. The purpose of the law is to introduce and
outline certain income tax measures as part of Canadian
Government Response to the COVID-19 Pandemic. Specifically,
Canada enacts part two of the COVID-19 Emergency Response Act
Emergency Response Benefit Act Approving the Creation of
Income support payments to workers who have a loss of
Income "due to the COVID-19 pandemic.
However, concerns remain associated with COVID-19
Emergency Response Act and the Canada Emergency Response Benefit
Action. In particular, the term "income" is not specified in
the Canada Emergency Response Benefit Act. Rather, the term used is
"Total Income". Furthermore, the term "total
Income "is also not defined in the Canadian Emergency Response
Benefit Act nor is it defined in the Canadian Income Tax Act. These
is problematic in relation to determining eligibility and how
Canadians may (or may not) interpret the CERB legislation and
regulates how CRA must apply the rules. So it is quite possible
that the CRA interpretation of net income is and may not be wrong
be supported by the courts in the event of contestation. If CRA doesn't back down
on their position it can be welcomed up to a judge
Interpretation.
In addition, the COVID-19 Emergency Response Act does not grant any grant
Canadians have the right to object or appeal against the CRA's decision in relation to it
where their CERB claims are denied. This seems to be overlooked
Taxpayer Rights under the Taxpayer's Bill of Rights.
The Taxpayer Bill of Rights contains 16 rights pertaining to the
Treatment that taxpayers are entitled to in dealing with the claim
CRA and covers several avenues that taxpayers pursue when they do
believe the CRA did not respect their rights. Specifically,
Article 4 of the Taxpayer's Bill of Rights grants the taxpayer the right
for a formal review and subsequent appeal. This means that if a
The taxpayer believes that he or she did not receive the full benefit
Claim according to the income tax law or the taxpayer cannot
reach an agreement with the credit rating agency on their tax matters, them
(the taxpayer) can request a preliminary review of their CRA file.
If the taxpayer agrees with the decision of the
CRA officer assigned to conduct the preliminary review, they (the
Taxpayers) can appeal this decision or apply for a judicial review
The competent court and certain matters may be decided by the
Canadian International Commercial Court. According to Article 4 objections,
Appeals and reviews can relate to income tax assessments and
Revaluations, GST / HST Reviews and Revaluations, Benefits and
Loans, Pension and Employment Insurance Reviews as well
Aid requests and voluntary information.
Also under Subsection 12 (1) of the Canada Emergency Response
Benefit Act when the CRA determines it is a CERB recipient
not entitled for the performance or that he or she has received an amount in
Exceeding their claim amount "the person must repay the
Amount of payment or the excess, as the case may be, as
as soon as this is feasible. "Note that according to Section 14 of the
Canada Emergency Response Benefit Act, no interest payable
CERB refunds due to "incorrect payment or
Overpayment. "As mentioned earlier, the ongoing COVID-19
The pandemic has created a lot of uncertainty and thus many Canadians
I don't have the funds to repay CERB, some of which are uncertain
how or when they will pay it back.
If your CERB application has been denied or you have received a letter
from the CRA in relation to the repayment of CERB and you disagree
You can apply for the CRA's decision to the Federal Court of Canada
for judicial review. Must be a request for judicial review
within 30 days of the date filed in the Federal Court of Canada
stated on the rating agency's decision letter. It doesn't have to be paid for
justified for a single taxpayer who is told the $ 14,000
CERB must be repaid to apply for judicial review
A legal aid clinic may fund an application.
Pro Tax Tips – tax advice and repayment from CERB
Given ongoing concerns about CERB, Canadians
should take into account that any CRA tax audit, including an audit in
A CERB application can cause the CRA to request access to
Details, including personal and financial records, that may not be available
relevant for the CERB claim as part of a more comprehensive tax audit. As
previously mentioned, CERB recipients that will be found later
Entitlement to the benefit can and must be checked for tax purposes
Reimbursement of the amounts with income tax. If you have any questions
CERB's eligibility criteria or if you received a letter from
the CRA in terms of repaying CERB and you would like
To dispute the rating agency's decision, please contact our tax office
Tax advice from one of our top Canadian tax lawyers.
The content of this article is intended to provide a general overview
Guide to the subject. Expert advice should be obtained
about your particular circumstances.