What Happens If You Can’t Repay Your CERB Payments?

By early October of this year, the Canada Emergency Response Benefit (CERB) program had provided over 81.6 billion dollars to more than 8.9 million unique applicants. That money helped Canadians across numerous walks of life make ends meet during one of the most worrying and uncertain years on record, but it didn’t come without certain conditions. Now, some Canadians find themselves expected to return their CERB to the government, even as the COVID-19 crisis continues.

But who has to repay the CERB — and what happens if you can’t? Don’t worry; we’re here to help you figure out whether you’ll have to repay anything and show you strategies that can make the process easier during this stressful period.

Series of cheques with Government of Canada letterhead

Who Has to Repay the CERB?

When the COVID-19 pandemic began, the Canadian government quickly ensured that as many people as possible could access the CERB. As a result, they opted to create a simple application process with minimal vetting.

The government’s decision to prioritize accessibility had several consequences:

  • It allowed people to receive the benefit even if they were not technically eligible for it.
  • It allowed people to continue receiving the benefit even if their eligibility changed during their benefit period.
  • The lack of oversight created situations in which some people received multiple benefits.
  • Some people also received the CERB even though they did not apply for it.

Frequently Asked Question: Was I Eligible to Receive the CERB?

The Government of Canada is currently working to recoup any CERB payments disbursed to people who were not meant to receive them. You may be required to pay back some or all of your CERB payments if you:

  • Earned more income than you anticipated while collecting CERB payments
  • Applied for and received the CERB through both Service Canada and the CRA during the same period
  • Applied for the CERB after quitting a job voluntarily
  • Applied for the CERB while living outside of Canada
  • Applied for the CERB when you were less than 15 years old
  • Applied for the CERB despite earning less than 5,000 CAD in the previous 12 months (or in 2019) from either:
    • Employment income (a T4 job)
    • Self-employment income
    • Provincial maternity or parental leave benefits
  • Applied for the CERB without meeting one of the following criteria:
    • Your work hours were reduced due to COVID-19
    • You stopped working due to COVID-19
    • You were not able to work due to COVID-19 (for example, if you were taking care of someone who was ill)
    • You collected EI regular or fishing benefits for a minimum of one week after December 29th, 2019, and the benefit period ended

Fortunately, the CRA seems to understand that many Canadians were confused about the eligibility criteria for the CERB. To identify likely candidates for repayment, the agency sent out over 400,000 notices to individuals and families whose applications appeared to contain errors. 

It’s still worth checking the list above to make sure your eligibility was legitimate — but if the CRA hasn’t contacted you and you don’t see a red flag here, you probably shouldn’t worry.

Frequently Asked Question: How Will CERB Affect My Taxes?

Keep in mind that all CERB payments are taxable. Benefits repaid before December 31st, 2020 have no impact on your taxes. However, the CRA will record any benefits not repaid by this date on the T4A tax information slip they issue you for the year, and you will have to pay taxes on these benefits in 2021. The lowest rate for such taxes is 15%.

Pile of CRA tax forms with binder resting nearby on desk

What if You Need to Repay the CERB But Can’t?

Canadians asked to repay the CERB may be experiencing greater financial pressure than usual, especially since the December 31st deadline comes just after the holiday season. However, the deadline’s primary purpose is to ensure that Canadians are not issued improper T4As after repaying some or all of their benefits.

The government has also stated that they are willing to work with Canadians who received improper benefits due to an honest mistake. The agency says it won’t charge interest or fines for “errors made in good faith” and that payment plans may be available for those who can’t repay the required amount all at once. Collections efforts and legal action will likely only target those who deliberately applied for benefits they weren’t supposed to receive.

Still, if you want to avoid tax complications in the new year, it’s probably best to pay back any benefits you weren’t supposed to get before 2020 is over. Canadians who need a bit more time may want to consider strategic borrowing options, such as lines of credit or personal loans they can use to gain a bit of extra breathing room.

Repay Outstanding CERB Debts and Simplify Your Taxes

2020 has been a challenging year already, so you definitely won’t want to spend 2021 in debt to the government or dealing with a tax nightmare. Avoid a stressful situation with the CRA by reviewing your CERB eligibility above and making plans to repay any money you received in error as soon as possible. If you need help finding a financial lifeline, please contact us and speak with an advisor who can help you identify all your options.

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