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Certain CERB clawbacks cancelled

Certain CERB clawbacks cancelled

The CRA and Revenue Quebec announced interest relief for certain individuals who received COVID-19 income relief in 2020

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Certain Canada Emergency Response Benefit (CERB) recipients may no longer have to repay this assistance to the government. The CRA says self-employed individuals who applied for the CERB based on their gross income will not have to repay amounts received under the program, provided they otherwise qualified for the CERB. The CRA's relief follows their earlier clarification that self-employed individuals should have considered their pre-tax net income (not gross income) to determine if they met the CERB eligibility requirements.

The CRA also announced that certain individuals who received COVID-19 related income support in 2020 may not be required to pay interest on outstanding income tax debt for the 2020 tax year until April 30, 2022. Revenue Quebec also announced similar targeted relief.

Note that the CRA and Revenue Quebec have not extended the tax filing deadline and individuals should complete and submit their 2020 tax returns by April 30, 2021 (or June 15, 2021, for self-employed individuals) to avoid late-filing penalties.

Background

The CERB provided eligible workers with an income support payment of $2,000 for any four-week period within the period from March 15, 2020 to October 3, 2020, for up to 28 weeks total, if several conditions were met. Among those conditions, the individual applying for the CERB must have had a total income from certain sources, including employment or self-employment, of at least $5,000 for 2019, or in the 12-month period preceding the day the CERB application was filed. The CRA subsequently clarified that for self-employed individuals, the $5,000 referred to net pre-tax income (i.e., gross income less expenses). However, some self-employed individuals incorrectly applied for the CERB based on their gross self-employment income, instead of their net pre-tax income.

Relief for self-employed CERB recipients

Self-employed individuals with less than $5,000 of net self-employment income in 2019, or in the 12 months prior to the date of their CERB application, who applied for and received the CERB will not have to repay it as long as their gross self-employment income was at least $5,000 and they met all other CERB eligibility criteria.

In addition, the CRA says that it will issue a refund to eligible self-employed CERB recipients who already repaid the benefit. The CRA is expected to announce more details in the coming weeks.

New 2020 interest relief

CRA relief

The CRA announced certain targeted interest relief for individuals who had a total taxable income of $75,000 or less in 2020 and received COVID-19 income relief through at least one of the following programs:

  • CERB
  • Canada Emergency Student Benefit (CESB)
  • Canada Recovery Benefit (CRB)
  • Canada Recovery Caregiving Benefit (CRCB)
  • Canada Recovery Sickness Benefit (CRSB)
  • Employment Insurance benefits, or
    Similar provincial emergency benefits.

The CRA says it will automatically apply this interest relief for individuals who meet the criteria. Once these individuals have filed their 2020 tax return, they will not be required to pay interest on any outstanding income tax debt for the 2020 tax year until April 30, 2022. The CRA also notes that it will not apply any CRA-administered credits and benefits normally paid monthly or quarterly, such as the Canada Child Benefit or the GST/HST credit, to reduce the individual's debt owing for the 2020 tax year.

Revenue Quebec relief

Revenue Quebec also announced that it will provide a one-year interest holiday until April 30, 2022 to certain individuals. To qualify, these individuals must have earned a total taxable income of $75,000 or less in 2020, have a tax balance owing on their 2020 tax return and received benefits under any of the following programs:

  • CERB
  • CESB
  • CRB
  • CRCB
  • CRSB
  • Employment Insurance benefits (including maternity or paternity benefits), or
  • Incentive Program to Retain Essential Workers (IPREW).

For more information, contact your KPMG advisor.

Information is current to February 15, 2021. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

© 2021 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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