When some Canadians began receiving warnings that they had to return pandemic relief money given as part of the Canada Emergency Response Benefits Program (CERB), one of the most frequently asked questions was: , what if I already paid taxes on these funds?
The good news, according to the Canada Revenue Agency (CRA), is that if you were taxed on the funds you have to pay, there are processes to adjust.
In 2020, while the federal government was quick to make sure that Canadians suddenly out of work due to COVID-19 could access aid, people were quickly approved for the CERB. But many of them now face paying part or all of the benefit due to a number of reasons, such as not being eligible, returning to work too soon, or having received an advance payment. ARC has since determined that it was not justified.
Letters from Service Canada or the CRA informing Canadians that they were saying money began to be delivered last fall, with a new round of warnings last month.
This meant that many people had already included the CERB in their 2020 income tax return and had been taxed on the funds they were now being asked to return.
For many, this was a shock. CTVNews.ca previously asked Canadians to contact them if they had received a letter saying they called CERB funds, and many respondents highlighted their resentment at having already paid taxes on those funds.
Responses were emailed to CTVNews.ca in early June and not all have been independently verified.
Zak Horkoff told CTVNews.ca that he received CERB after being fired at the beginning of the pandemic in March 2020.
He returned to work fairly quickly, but still received an advance payment of $ 2,000 in addition to his first weekly payment.
“When I filed my taxes in 2021 I made sure to include CERB payments as income and I was charged taxes on the amount accordingly,” Horkoff said.
Although he was not surprised when he was told that he would have to return this advance payment, he said that he would not have to return the full amount as he had paid taxes.
Sarah Milligan, of London, Ontario, said that when she applied for employment insurance (EI) shortly after the pandemic began, she was automatically switched to CERB. Since then, he has received a letter stating that he had overpaid and owed him $ 2,000.
“When I did my 2020 taxes, I ended up owing more than $ 700 in taxes because of the CERB,” he said. He added that when asked why he had to return $ 2,000 in full instead of deducting the value of the proportional taxes, he was told he would have to change it next year.
He said this felt unfair and had not been financially stable since the start of the pandemic.
“It’s all stressful, I can’t afford that,” he said.
WHAT SHOULD I DO IF I PAYED TAXES TO THE BRAIN THAT I HAVE TO RETURN?
You still have to return the full amount requested by the CRA or Service Canada; there will be no funds deducted from the amount of CERB you owe based on the taxes you have already paid.
However, CRA told CTVNews.ca in a statement that “people who reimburse COVID-19 benefit payments that were not eligible to receive can claim the refund as a deduction on their income tax return.” .
Yannick Lemay, a tax expert at H&R Block, told CTVNews.ca in a telephone interview that there are some ways to do this.
In general, if there is an error or problem with your income tax return for the past year, including a refund of money to the government that you previously reported as income, you can request a reassessment of a previous tax return using online services such as ReFILE or a form called T1ADJ, he explained.
“You can also use this form to submit your amendment. And then what the CRA does is it will mail you a reassessment notice,” he said. “That’s what makes your official tax return this year.”
This means that a person can request to add new information to a previously filed tax return and have their taxes recalculated for that year.
When it comes to CERB refunds, you can decide for which year you want to file the refund as a deduction.
“For refunds made before 2023, people can decide if they want to claim it as a deduction from income tax for the year in which they made the refund, the year in which the benefits were received, or split the deduction between any of these years, depending on what would help them best with their tax situation, “the CRA said.
A simpler option that does not require a revaluation is also on the way for those who are willing to wait until the next tax period.
The CRA explained that it is developing a new form called T1B, “Application to Deduct the Reimbursement of Federal COVID-19 Benefits in a Previous Year.”
This form will be available for use when Canadians file their 2022 tax returns next year.
“By submitting this form with your return, people will not have to adjust their previous year’s return if they want to claim the deduction for the year they received CERB,” Lemay said. This form will allow you to choose the year in which you want to file the refund as a deduction, without having to formally request a reassessment of that year’s return.
WHAT IF I DON’T WANT TO WAIT FOR SPRING TO COME?
You can apply for a reassessment from a previous tax period instead of waiting to correct the record of your 2022 tax return, but it may not be faster, Lemay warned.
The first reason is that the CRA is experiencing many delays in processing.
“The second reason is that you don’t have the sheet that indicates the amount you paid to the government,” he said.
After repaying the CERB amount due, you will receive a tax receipt in January or February, he explained, which will help you file your refund as a deduction.
Although you do not need this sheet to request a reassessment, it makes the process much easier.
Those who decide to apply for a reassessment can do so by a copy of a check mailed to the CRA or Service Canada, or by electronic payment receipts as proof that a refund has been made.
“But it’s not something I suggest, because you don’t know all your income for 2022 either, so it may be more profitable to ask for the deduction in 2022 when the year is over and you have all the information in front of you. of you, ”he said.
The CRA added to its statement that “if a person submits a statement or application for a paper adjustment, the information on the T4A sheet or letter they have received from Service Canada should be included with the statement or If a person submits a return electronically or submits a request for adjustment electronically through My Account or ReFILE, documents and information must be retained in case validation is required later. .
AND IF YOU HAVE ALREADY PAID THE BRAIN IN 2021?
Many Canadians were informed that they had to return an advance payment from CERB as of last fall. If you paid the funds due in 2021, you will not be able to use the following T1B form.
Instead, you must request a reassessment of your 2020 or 2021 return to file the return as a deduction on one of those returns.
“If you paid in November, either apply for the deduction on your 2021 tax return or file this T1ADG to amend your 2020 return, but that is up to you to calculate which is the most advantageous for you.” said Lemay.
WHAT IF I HAVE NOW BACK PAYMENTS BACK AFFECTED BY A PREVIOUS TAX REFUND?
“Yes [someone] they received less money, for example, from a tax return because of the CERB payment they received, this would be because their taxable income in that year was higher than in the previous year or the total taxes that paid during the year were lower. than what they paid the year before, “Lemay said.
One situation is that because of the CERB, a person’s income may have exceeded the GST credit threshold, which could make their tax return lower than usual.
Lemay said that if you are concerned that your tax refund was affected by CERB in a previous year, filing the refund as a deduction from your taxes could also help to correct it.
“[If your income] was too high due to CERB payments you received, if you adjust your return and then claim this deduction for the refund you made, if your income falls below the GST credit threshold, you will receive it. ”
Lemay said that while this whole situation can be stressful for Canadians who had no idea they would have to pay any CERB, it is important to remember that there are no penalties or interest on refunds. He said those concerned about not being able to pay it back should contact the CRA or Service Canada as soon as possible to develop a flexible payment schedule.