In the face of widespread confusion, complaints and a looming class action lawsuit, the federal government has changed course, cancelling plans to require some self-employed individuals to repay the Canada Emergency Response Benefit (CERB) funds they received at the height of the COVID-19 crisis.
Controversy erupted late last year when the Canada Revenue Agency informed thousands of self-employed Canadians that they may not have qualified to receive CERB relief, and could be required to repay the funds. The confusion stemmed from how qualifying rules were originally interpreted by many recipients.
To qualify for CERB, self-employed applicants were told they would need to demonstrate $5,000 in self-employment income in 2019, or over the 12 months prior to applying. Many applicants believed that the rules allowed for a claim of $5,000 in gross income, while the CRA later stated that self-employed individuals were to have used a baseline threshold of $5,000 in net, pre-tax income to determine their eligibility.
The government yesterday announced that self-employed individuals “whose net self-employment income was less than $5,000 and who applied for the CERB will not be required to repay the CERB, as long as their gross self-employment income was at least $5,000 and they met all other eligibility criteria.” Individuals with net self-employment income of less than $5,000, and who already repaid their CERB benefits, are now eligible to apply for a repayment of that amount. Further details are to be announced in the weeks ahead.
Ottawa also announced that upon filing a 2020 income tax and benefit return, Canadians who received COVID-19 support benefits will not be required to pay any interest on any outstanding income tax due for the 2020 tax year until April 30th, 2022, giving them more time to pay any amounts owing.
The government statement notes that, “To qualify for targeted interest relief, individuals must have had a total taxable income of $75,000 or less in 2020 and have received income support in 2020 through one or more of the following COVID-19 measures:
- the Canada Emergency Response Benefit (CERB)
- the Canada Emergency Student Benefit (CESB)
- the Canada Recovery Benefit (CRB)
- the Canada Recovery Caregiving Benefit (CRCB)
- the Canada Recovery Sickness Benefit (CRSB)”
Receiving Employment Insurance benefits or COVID-19-related provincial emergency benefits will also qualify individuals for interest relief, which will be applied automatically by the CRA.
It’s important to note that the filing deadline for 2020 tax returns has not been extended, and remains April 30th, 2020 for most individuals.
If your organization requires assistance with regard to COVID-19 relief benefits, please contact a member of our team.
Armando Iannuzzi, Co-Managing Partner