Summary about benefits during Covid-19

It’s a reprieve for more than 400,000 self-employed Canadians who got letters from the Canada Revenue Agency (C-R-A) last year telling them they’d have to repay federal emergency benefits.

Prime Minister Justin Trudeau says anyone who applied for the Canada Emergency Response Benefit (CERB) based on their gross, not their net income, won’t have to repay the money.

Things have been hard during this on-going pandemic. The government is providing many emergency benefits to Canadians so they do not face a financial crisis during the COVID-19. Many people were not eligible for these benefits and even many of those returned those benefits because they didn’t have enough information.

No matter what type of tax we have to pay, whether it is a business tax or personal tax, one should be aware of its benefits. However, there are some due time limits within which you have to pay the amount. Also, the benefits that you have received during the COVID-19 pandemic will be included on your income. 

Why do I need to repay the benefits I received?

• If you returned to your work earlier than what you had expected or receive retroactive pay from your employer
• You have to repay the benefit you received during the pandemic if you made any mistake in applying for the benefits. 
• If you receive more benefits than what you were eligible for, you have to repay or return the amount you received. Also, you can apply for only one emergency benefit either from CRA or Service Canada.

How to Know Whether You Have to Repay the Benefits or Not? 

There will be a letter for you from Canada Revenue Agency or CRA from which you will certainly get notified for the benefits that you have received. CRA’s notice doesn’t mean that you got a deadline, but the CRA is asking the people of Canada to return the extra benefits (what they are not entitled to) that they have received during the crisis.

When can you return the benefits?

There aren’t any specific deadlines provided by the government to repay the amount you have received. However to avoid penalties or interest in the future, CRA is just providing you with an informational letter to return the COVID-19 benefits. 

How can you return the benefits?

You will have several options to repay the COVID-19 benefits that you had received during the pandemic.

• For those who have an original cheque that you had received.
• If someone does not have the original cheque or if you received the COVID-19 benefit by direct deposit, you can return the amount through your CRA My Account, through online banking, or by mailing a cheque.

Canada Emergency Response Benefit (CERB)

What is CERB?

The Canadians employed or self-employed directly infected by COVID-19 received financial support from the Canada Emergency Response Benefits (CERB) on the crisis due to this on-going pandemic. It includes those people such as employed, self-employed, contract workers, and wage earners. Eligible people could receive $2,000 for a period of 4-week or $500 per week. 

How will your taxes be affected by CERB?

When you file for a return, you have to pay a tax on your CERB payments. The benefit amount you received will make your total income higher than the previous year as the benefit will be included in your income for 2020. This is why you will have to pay a higher tax than before, as you’ll find yourself in a different tax bracket. 

The CERB payments received from the CRA will be the slip T4A in box 197. The CERB expenses will be included on the regular Employment Insurance (EI) benefits in box 14 on the T4E slip, only when you receive this benefit from Service Canada. The residents of Québec will enjoy the advantage in a box O of the slip RL-1.

Those who find out that they weren’t eligible for the CERB payment benefit after receiving them will have to repay or return the amount given. You won’t have to pay tax on these if you refund the benefit amount before December 31, 2020, when you file for the return.

Temporary Changes to the Employment Insurance(EI) Program

What’s this program?

Many Canadians enjoyed the EI benefit after the end of CERB payments. There have been few temporary changes made to this program by the federal government so that more Canadian can easily access their benefits. 

How will your taxes be affected by this program?

Even though EI benefits are taxable, you don’t have to worry as a resident of Québec as there will be a T4E slip or T4E (Q). Showing the employment insurance you received or repaid in the current year will help you know how much tax you owe.

When you file your tax return, depending on your net income for the year, you may need to repay some of your EI benefits. If your net income for 2020 is greater than $67,750, you must repay 30 percent of the lesser of your net income above $67,750 or the total regular benefits you received in the tax year.

Canada Emergency Student Benefit (CESB)

What is CESB? 

The post-secondary students or graduates who couldn’t find work due to the pandemic have receivedtemporary income support from CESB. CESB gives the benefit of $1,250 per month for four months. Disable students or dependants could receive an extra amount of $750 per month.

How will your taxes be affected by CESB?

When you file your return, you’ll have to pay the tax on CESB amounts. Your total income will increase than last year as this benefit will be included with your total 2020 revenue. You have to pay a higher tax than you did the previous year as you would find yourself in a different tax bracket. 

You’ll receive the amount of your T4A slip in the box of 198/199. The residents of Québec will receive the benefit amount in box O of their RL-1 drop, and while filing for the return, you have to report this amount.

After receiving the CESB payments, if you find out that you weren’t eligible for the benefit, you’ll have to return or repay the amount. To avoid paying any tax on them while filing for the return, you have to refund the CESB amount before December 31, 2020.

Wrapping up We have tried to provide you with all the necessary information related to returning the government’s extra benefits. We hope you’ll find this blog helpful, and if you face any such tax-related problems, if you are worried about whom to rely on, then Nagpal Financial & Tax Services Inc. will be happy to help you.