CERB and Employment Insurance
The Canada Emergency Response Benefit (CERB) will end on September 26 and will be replaced by the traditional Employment Insurance (EI) and three new EI benefits.
I will briefly review all of the benefits and provide some recommendations to reduce any potential required repayments.
CERB Ends September 26
CERB has been available to employees and the self-employed who had their income reduced because of the COVID-19 pandemic. It has been in place since March 15 and will end on September 26 for a total of 28 weeks. You can still apply for it until December 3 2020. The payment is $2,000 per four week period and the maximum that can be earned is $14,000. This is taxable income, but there was no tax deducted. Those who received it should expect to pay 26 to 46% tax on this income. Next tax season, February to April 2021, your tax reconciliation may be quite different than previous years.
If you received CERB and employment income or self-employment income for the same period, you may need to repay some or all of the CERB. I recommend you repay any CERB owing by December 31 2020. We do not know yet when Canada Revenue Agency (CRA) will start auditing the CERB payments, but employers will be contacted to confirm when employment income was earned and paid.
There may be a tax reporting issue for those who repay some or all of the CERB benefits: the amount repaid may not appear on the tax slip. So keep good records of any benefits you repay so we can claim it as a deduction.
Most CERB recipients will be transitioned back to the EI program after September 26 if you are still not working because of COVID-19. The CERB program was administered by CRA, so after September 26, you will need to apply for EI via Service Canada.
CRB, CRSB, CRCB
There are three new benefits available to those who are not eligible for traditional EI benefits. These new benefits will be administered by CRA and not Service Canada.
CRB, Canada Recovery Benefit, is for those who are self-employed or employees that were not eligible for regular EI (not enough hours). The CRB will provide $400 per week for up to 26 weeks to those workers who are still not able to work due to the pandemic, or their income has decreased. You must be available and looking for work and you must re-apply every two weeks.
If your net income for 2020 is more than $38,000, you will need to repay some of the CRB. (Start thinking RRSP contributions to lower your net income).
The Canada Recovery Sickness Benefit (CRSB) is a new benefit for workers who are ill with COVID-19 or need to self-isolate. It will pay $500 per week for up to two weeks. This benefit is available to employees and the self-employed.
The third new benefit is the Canada Recovery Caregiver Benefit (CRCB). It will provide $500 per week for up to 26 weeks if you are unable to work because you must care for a child or family member with a disability because their daycare or care facility or school is closed due to COVID-19; or because they cannot attend for medical reasons.
EI or CRB Repayment
If you receive EI or the new CRB in 2020, you may want to get an estimate of your 2020 taxes in January or February 2021 to see if it makes sense to buy some RRSPs. Buying RRSPs may help reduce or minimize some of the repayments that would otherwise be payable when you file your 2020 taxes. EI repayment occurs when net income exceeds about $68,000. The new CRB repayment occurs at only $38,000.
Tax Deadline September 30 2020
If you have an amount owing from your 2019 taxes, you can pay in full by September 30 and not have any interest added to the amount owed.
If you haven’t filed your 2019 taxes yet, you have until September 30 to file and have no late-filing penalty if you pay the amount owing in full. If you have not filed yet, any benefits you received since July from Canada Child Benefit, GST Credit, or Guaranteed Income Supplement may need to be repaid. They were estimated based on your 2018 income, but will be reversed in October 2020 if you have not filed your 2019 taxes.
Next tax season will be different because of all the new taxable benefits many of our clients will have received in 2020. I suspect there will be fewer or lower tax refunds and more “taxes owed”.
Anni Markmann is a Personal Income Tax Professional and Certified Financial Planner; living, working, and volunteering in our community. Contact Ste Anne Tax Service at 204.422.6631 or 36 Dawson Road in Ste Anne (near Co-op) or info@SAtaxes.ca