Canadians Challenged by Response Benefit Applications

Beth Graddon

The Canada Emergency Response Benefit (CERB) has already been repaid by hundreds of thousands of recipients for various reasons:  program ineligibility, application errors, CRA processing errors and more. Some of the same issues now plague the new Canada Recovery Benefit (CRB), and it may be in part due to a computer glitch.

Applications for the Canada Recovery Benefit (CRB), which is administered by the CRA, opened on October 12. This program is specifically for those who are not entitled to Employment Insurance (EI Benefits), but whose income has been negatively affected by the Pandemic.

Those eligible can receive $1,000 payments ($900 after tax withholdings) for every two-week period up to a total of 13 eligibility periods between September 27, 2020 and September 25, 2021. Applications must be submitted every two weeks to keep receiving payments. More information on specific eligibility requirements for the CRB is available here.

A glitch reported by some applicants between October 13-16 prevented the submission of new applications. The CRA has addressed potential system issues and has since clarified that anyone continuing to receive error code 026 may actually be eligible for EI instead or may have applied to receive it earlier this year.

It’s an error that’s designed to prevent people from inadvertently or accidentally double-dipping into benefit programs, as occurred with the CERB leading to complicated repayment requirements.

As it stands, the income thresholds established with the CRB and limited amount of tax reduced at the source will lead to an interesting tax season for the 600,000+ people who have tapped into the program so far.

The CRA is only deducting 10% tax at the source, and anyone who makes more than $38,000 this year will have to repay $0.50 on every dollar earned over the threshold. For some Canadians, this is likely to lead to more taxes due upon filing next April and possible repayment requirements. Some of these same recipients may also need to repay some CERB amounts received, in addition to  paying up on their taxes,  as none were withheld at the source.

It's critical for tax and financial advisors to make pandemic recovery benefits recipients aware of their tax filing responsibilities and the potential for repayment and taxes due.  An RRSP contribution, for those who are eligible, can help to reduce the tax load. 

As we gear up for a complicated tax season ahead, it’s a great opportunity to come up to speed on the unique tax issues that surfaced this year and train new and returning team members.

It’s also a great time to update your credentials, as Canadians will need the essential services of tax specialists to stay out of tax debt and manage their emergencies funds, should the pandemic continue to affect us well into 2021.

Additional educational resources: Take the DFA-Tax Services Specialist™ Designation Program online. For those helping corporate clients and investors plan ahead before year-end, our next live event: The Virtual CE Summit on November 18 is another invaluable tool.