COVID-19 – Canadian Tax and Business News, release #32
Our COVID-19 Canadian Tax and Business News updates are our way of informing our clients, friends and business associates with recent information that may help businesses and individuals while coping with the outcomes from the COVID-19 pandemic.
Our goal is to monitor the news and release relevant information as it becomes available.
The summary below is based on our understanding and interpretation of the announcements made by the government. The information below is in summary form and subject to change until the proposals are passed as legislation. Contact one of our professionals to discuss these matters in the context of your situation before acting upon such information.
Canada Emergency Response Benefit (CERB)
On February 9, 2021, the Federal government announced that self-employed individuals who applied for CERB and who qualified based on their gross income will no longer need to repay this benefit provided they meet the other eligibility criteria. CERB was introduced to provide financial support to Canadians affected by COVID-19. If eligible, an individual could receive $2,000 for a 4-week period.
When CERB was introduced the eligibility criteria included:
- Individual resident in Canada and are at least 15 years old;
- Who have lost their jobs or have stopped working because of COVID-19 or are eligible for Employment Insurance (EI) or have exhausted their EI between December 29, 2019 – October 3, 2020;
- They had employment and/or self-employment income of at least $5,000 in 2019 or 12 months prior to date of application;
- Who have not voluntarily quit their job.
Other requirements also included that the individual applying for the first time should not have expected to earn more than $1,000 for at least 14 days during a 4-week period.
Since there was some ambiguity whether income referred to gross or net income for determining eligibility, Finance announced that self-employed individuals who would have qualified based on the gross income test will not have to repay the benefit even though they were not eligible for it. Finance is not changing the legislation or their position that income refers to net income. They are simply providing relief to those individuals who applied based on incorrect information provided by the Canada Revenue Agency.
For self employed individuals to be eligible for these relieving measures, they must have:
- Net self-employment income less than $5,000;
- Applied for CERB;
- Gross self-employment income of at least $5,000 and they met all other eligibility requirements as noted above.
Those self-employed persons who voluntarily returned the CERB payment because of the ambiguity will be repaid by CRA or Service Canada. However, individuals who did not apply because they interpreted the test as a net income test cannot retroactively apply for the CERB. More details will be provided on this program in the coming weeks.
Interest relief on income tax debt
The announcement also included further incentive in the form of targeted interest relief to Canadians who received income support benefits because of COVID-19. Once individuals have filed their 2020 returns for both personal taxes as well as for benefits received, they will not be required to pay interest on any outstanding tax debt for 2020 till April 30, 2022. This provides a great relief to Canadians to pay any outstanding dues on their personal taxes.
- Individuals must have had a total taxable income of less than or equal to $75,000 in 2020;
- Individuals have received income support in 2020 through any of the following measures:
Covid-19 measures covered for the above interest relief
- 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);
- Employment Insurance benefits; or
- similar provincial emergency benefits
The relief will be applied automatically by the CRA when all the above requirements are met. In addition to the above, the CRA will also not reduce any eligible individuals’ tax debt owing for 2020 by the normally paid periodic payments of Canada Child Benefit and GST/HST credit.
Currently, no extension has been provided on the filing due date for personal tax returns and the announcement has encouraged timely filing of returns to ensure that there is no interruption on receipt of people’s benefits. These benefits are provided with the intention of relieving the financial stress experienced by a lot of Canadians during these unprecedented times. Since the benefits provided by the government are taxable benefits, this relief on the interest will give some time and flexibility to individuals to pay their tax debt. Although payment of tax debts are extended to April 30, 2022, it is still imperative that individuals file their personal tax returns on time as late filing penalties will still apply on returns filed after April 30, 2021 with a balance owing.
As we all try to stay safe, we need to remind ourselves business will get back to normal but in the meantime let’s all do our part to get to normal as soon as we can. If you have any questions or require further information, don’t hesitate to reach out to us.