The CRA told Global News the letters it sent out are meant to “explain what qualifies as earned income to be eligible for CERB, and what does not.” It adds that those receiving such letters “should not interpret it as a determination that they have definitively been deemed ineligible for the CERB.”
But many self-employed Canadians argue the wording of the online CERB application and eligibility requirements did not make it clear that applicants had to qualify based on their net income.
Global News has found a single mention of net income for self-employed CERB applicants buried deep in an official Q&A page on the CERB. The CERB application validation page, which is still online even though the benefit is no longer available, only mentions a requirement of “employment and/or self-employment income of at least $5,000.”
However, the eligibility criteria for the more recent Canada Recovery Benefit (CRB), which also has income-threshold requirements, clearly state that self-employed applicants should be looking at their net income.
“Self-employment income is your revenue minus any expenses incurred to earn the self-employment revenue,” the page reads.
Rotfleisch believes the clearer wording for the new CRB benefit is likely the result of the CRA learning from the communication issues around CERB, which he calls “a large screw-up.”
While tax experts understand that self-employment income when dealing with the CRA usually means net income, “if you’re not a tax practitioner, there is no way you would understand that from the website,” he says.
Repayments and taxes
The CRA is encouraging CERB recipients who don’t meet eligibility criteria to repay any amounts for which they didn’t qualify by Dec. 31, 2020.
“This should not be misunderstood as a payment deadline,” the CRA told Global News via email. Canadians can repay the money after the end of the year, the agency said.
However, if you return a CERB payment after Dec. 31, “you will need to pay tax on the full CERB amount you received in 2020,” a CRA page on CERB repayments currently reads.
This raises the question of whether some taxpayers may have to pay income taxes in 2021 on benefits they already returned, De Luca says.
For example, if you returned $14,000 worth of CERB in January 2021, you may still have to pay taxes on that $14,000 on the 2020 tax return that you’ll file in the spring of 2021.
“If an individual makes a repayment in 2021 as they have been determined to be ineligible for a benefit received in 2020, the individual will still receive a T4A tax slip for 2020 and will be expected to report the benefit as income on the individual income tax and benefit return for the 2020 tax year,’ the CRA told Global News via email.
The CRA says any taxes paid on your 2020 return for CERB amounts you repaid “will be adjusted after you file your 2021 taxes.”
Specifically, “any repayments made in 2021 will be recognized on a T4A slip for 2021, which will allow the individual to claim a deduction on the 2021 income tax and benefit return,’ the agency said via email.
The CRA also said via email that Canadians who applied for the CERB “in good faith” and are later required to pay money back won’t face penalties or interest.