The Canadian government introduced several benefits to support Canadians facing financial hardship as a result of the COVID-19 pandemic. Due to the confusing eligibility requirements for some of these benefits, it is not surprising that many recipients did not meet the eligibility criteria for the benefits they received, or may have even received a benefit payment in error.
Some of the benefits that have been offered to Canadians during the pandemic are:
- Canada Emergency Response Benefit (CERB)
- Canada Recovery Benefit (CRB)
- Canada Recovery Caregiving Benefit (CRCB)
- Canada Recovery Sickness Benefit (CRSB)
- Canada Emergency Student Benefit (CESB)
Here is what you need to know if you are one of the many Canadians who are required to make a repayment of any of the listed benefits.
Repayment of the COVID-19 benefits
If you are not eligible for the CERB, CRB, CRCB, CRSB, or the CESB benefits, you will have to return any payments you received.
How you return the benefit depends on the type of benefit you received and the manner in which it was received. In most cases, you may have options to repay the amount including:
- Returning the owed amount online using Canada Revenue Agency's (CRA) online payment options, including CRA My Account.
- Returning the owed amount using your bank or financial institution's online service.
- Mailing a cheque or money order to the CRA.
- Making a debit card or cash payment in person at Canada Post.
For more information on where you can repay any unentitled benefits you received, visit the CRA's official webpage.
Tax treatment of repaying of benefits
COVID-19 benefits that you receive are taxable and must be reported on your personal income tax return. If you are required to repay these benefits, the timing of when you repay them may have an impact on your income taxes.
In the past, you were allowed to deduct the amounts you repaid only in the year the repayment was made. However, recently enacted rules allow you to choose whether to claim a deduction on your personal income tax return for the year of a benefit repayment, or on your personal income return for the year you received the benefit. Individuals may also split the deduction between those two income tax returns, if the total deduction does not exceed the amount repaid. These rules are intended to reduce the impact that the timing of the deduction may have on your potential income tax liability.
To further clarify, here's an example. If you made a repayment in 2021 of CERB amounts received in 2020 prior to filing your 2020 personal income tax return, you could have claimed the deduction on your 2020 personal income tax return. If your 2020 personal income tax return has already been filed and you made your repayments of CERB amounts received in 2020 anytime in 2021 or 2022, you can request a reassessment of your 2020 personal income tax return to include the deduction.
These new rules apply only to repayments of the benefits made before January 1, 2023. Repayments made after December 31, 2022 of the benefits you reported as income in 2020 or 2021 can only be deducted in the year the repayment was made. This includes payment arrangements entered into with the CRA before January 1, 2023 to repay a benefit later (e.g. in 2023).
What about the Canada Worker Lockdown Benefit (CWLB)?
If you receive CWLB payments that you are not eligible for or that are paid in error, you are required to return any payments you receive. The timing of when you repay a CWLB amount may also impact your taxes.
However, unlike the other COVID-19 benefits noted above, in the case of the CWLB, you are only permitted to deduct the amounts you repaid on your personal income tax return for the year the repayment is made.
Good news for students
The government proposed measures in the 2021 Fall Economic and Fiscal Update to provide partial debt relief to students who received, but were not eligible for, the CERB.
Once enacted, it is expected that the legislation will provide debt relief to students who received, but were ineligible for, the CERB and yet were eligible for the CESB by allowing their CERB-related debt to be offset by the amount they would have received from CESB during the same benefit period. More information will be provided as details become available.
Safe benefit repayment
It is important to be aware of fraudulent emails, texts, or calls claiming to be from the CRA about repaying benefit amounts or requesting personal information.
If you receive a legitimate request to repay a benefit amount, ensure that you return the payment using one of the specified options provided.
How BDO can help
Your BDO advisor can assist you with determining the optimal time to claim the deduction on your personal income tax return, as well as determining how the repayment of the CWLB may impact your taxes.
The information in this publication is current as of January 26, 2022
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.