How will CERB affect your 2020 tax return?
This may be an unusual year for preparing your income taxes – especially if you received the Canada Emergency Response Benefit (CERB) or any other COVID-19 government benefit in 2020. Many people are concerned about how receiving the benefits will affect their 2020 tax return. Many individuals and families are already struggling with their household budget and debt repayment, so there is concern that the tax impact of the government benefits will worsen their financial situation.
Nearly 9-million Canadians applied for the CERB, and approximately $81.64 billion was paid out. In Saskatchewan, over 240,000 residents applied for the CERB. When the government paid out these funds, they did not tax the benefit at source. Furthermore, in an effort to get funds into the hands of Canadians quickly, they also did not assess eligibility. As a result many people received the benefit that were not in fact eligible, and many Canadians may have an income tax bill that they were not expecting and may not be able to pay off.
Collection letters from CRA
The Canada Revenue Agency has sent out approximately 450,000 collection letters to Canadians indicating that they must repay the CERB they received on the basis of ineligibility. The government made a recent announcement regarding self-employed individuals, clarifying that if they applied for the benefit based on their gross income and not their net income that they will not have to pay it back. However, many people are still expected to pay back the benefits received.