COVID-19 Benefits: Tax Implications for Individuals




Starting in April 2020, many Canadians received COVID-19 support benefits.

If you received these benefits, there are tax implications to be aware of.


COVID-19 benefits for individuals include:

  • Canada Recovery Benefit (CRB)

  • Canada Emergency Response Benefit (CERB)

  • Canada Worker Lockdown Benefit (CWLB)

  • Canada Recovery Sickness Benefit (CRSB)

  • Canada Recovery Caregiving Benefit (CRCB)

  • Canada Emergency Student Benefit (CESB)

  • Employment Insurance (EI) program


It is important to understand that most government-issued Covid-19 emergency benefits are considered taxable income.


This means:

  • You need to file your tax returns to maintain eligibility for certain COVID-19 benefits,

  • You must report those benefits as income on your tax return and pay taxes on them.


 

COVID-19 Emergency Benefit Repayments


1. Canada Recovery Benefit (CRB): claw-back


The Canada Recovery Benefit provided income support to employed and self-employed individuals who lost income due to COVID-19 and were not eligible for Employment Insurance (EI) benefits.


If you earned more than $38,000 in 2020, or 2021, you may need to repay CRB benefits.


Recipients of CRB will have to repay at the rate of 50 cents for every dollar of income earned over $38,000 up to the total amount of CRB received in the year.

Example: Sally received $4,000 in CRB and had taxable income of $40,000 in 2021. As her income is $2,000 above the threshold ($40,000 - $38,000 = $2,000), Sally will have to repay 50 cents times $2,000 ($2,000 * $0.50 = $1,000). This means Sally will have to repay the government $1,000 of the $4,000 she received in CRB.



2. Canada Worker Lockdown Benefit (CWLB): filing requirements


The Canada Worker Lockdown Benefit gives temporary income support to employed and self-employed individuals who cannot work due to a COVID-19 lockdown.


Individuals who received CWLB in 2021 will be required to file their tax returns by December 31, 2022. If a return is not filed, individuals will lose eligibility for the COVID-19 benefits and may need to pay back benefits already received.


Similarly, an individual receiving CWLB in 2022 will lose entitlement if they do not file their 2021 and 2022 income tax returns by December 31, 2023.


Applications for benefits must be filed within 60 days of the end of the week. The first week for which the CWLB would apply was October 24 – 30, 2021.


The list of designated COVID-19 lockdown regions for the Canada Worker Lockdown Benefit may be found here.



3. COVID-19 Benefits Repayment Required Due to being Ineligible


Towards the last quarter of 2020, some Canadians have started to receive letters from CRA requesting repayment for incorrectly received emergency benefits.


Common reasons for having to repay COVID-19 benefits include:

a. Personal situation changed since application.

b. There was an error on the application.

e.g. income was higher than expected.

c. More financial assistance was received than one was eligible for.

e.g. Received benefits from more than one program at the same time.


If you received any of the following amounts at the same time as CRB, CRSB, or CRCB, you would need to repay COVID-19 benefits to the CRA:

  • Short-term disability benefits

  • Workers’ compensation benefits

  • Employment Insurance (EI) benefits

  • Québec Parental Insurance Plan (QPIP) benefits


 

Tax Treatment of Benefits Repayments

COVID-19 benefits are taxable income. If you are required to repay these benefits, you may receive a tax deduction once repayment is made. Therefore, the timing of repayment may have an impact on your personal income taxes.


Repaying CERB, EI, CESB, CRB, CRSB, or CRCB

Recently proposed rules allow individuals to claim a deduction on the tax return for the:

  • year the benefit was repaid, or

  • year the benefit was received.



Our team will help determine the best time to claim a tax deduction for repayment of COVID-19 benefits.

Individuals who have already filed their tax returns for the year of receipt can request an adjustment to the return for that year to claim the deduction. This option would be available for benefit amounts repaid before 2023.


These new rules are intended to reduce the impact that the timing of the deduction may have on potential income tax liability.


How to Repay COVID-19 Benefits


1. Online: using CRA My Account

2. Online banking: with your financial institution

3. In person: at Canada Post with a debit card or cash payment.

4. By Mail:

a. Make the cheque or money order payable to Receiver General for Canada

b. Specify the name of the benefit you are repaying,

c. Indicate which eligibility period you are repaying,

d. Include your Social Insurance Number (SIN)

e. Mai the cheque or money order to:

Revenue Processing – Repayment of CEB Sudbury Tax Centre 1050 Notre Dame Avenue Sudbury ON P3A 0C3

If your payment is not honoured, the CRA will charge a fee.


If you have the original cheque

You may return it by mail to the address above; be sure to include the above information.



Recognize CERB repayment scams

Beware of fraudulent emails, texts, or calls claiming to be from the CRA about repaying the CERB or requesting personal information.


For more information on how to repay a COVID-19 benefit payment, options to repay, and how it impacts your taxes, visit the CRA’s website.



 

What will happen if I do not or cannot repay?


If you cannot repay any required Covid-19 benefits received, it is important to communicate with the CRA and negotiate a repayment plan, to avoid repercussions. The CRA collections department has generally been more flexible during the COVID-19 pandemic.


If you do not repay any required Covid-19 benefits received, CRA can apply future tax benefits, i.e. tax refunds and credits, towards your debt.


You might be subjected to an escalated collection process with the CRA garnishing your wages or freezing your bank accounts. Tax debts should be settled as soon as possible to avoid adverse financial consequences.



 

Disclaimer

This blog post is a summarized version of complex matters that are rapidly changing. The preceding information is provided for general, educational purposes only. Speak with one of our team members if you have any questions about your specific accounting or tax situation.

 


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