CERB and Tax Implications

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Apr 14th, 2020 11:22 am

angryaudifanatic [OP]: Deal Addict; Nov 10, 2018; 3976 posts; 4157 upvotes

Apr 14th, 2020 11:22 am

CERB and Tax Implications

If I understand the $2k/month benefit for those that qualify, income taxes will be collected, but not immediately. So my understanding is that people get $2K tax free, and then the CRA will then collect taxes on this after the fact/once 2020 taxes are filed.

Well, isn't that sort of, stupid? The people who are collecting this benefit are people who never bothered to put aside sufficient money in the first place in a rainy day fund (either intentionally or not, that's beside the point). So when the CRA comes knocking on their door to collect taxes, I'd think the vast majority of people who are asked for said money would not be able to pay it back, thus adding to the whole issue of people not putting aside money.

No?

For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.

167 replies

Apr 14th, 2020 11:39 am

smacd: Deal Fanatic; Oct 6, 2007; 8697 posts; 5623 upvotes; Kootenays

Apr 14th, 2020 11:39 am

No. Whether or not you have a rainy day fund has no bearing on who can apply for the CERB. It is for people who have been put out of work due to covid-19. If I'm not able to work or run my business, should I tap all of my funds that I was prudent enough to put away first and risk losing my business before I ask for help? IMHO, the idea of the CE(for Emergency)RB is to get money out to people immediately, to avoid as much disruption to the economy as possible. Taxes owing in 2020 can be sorted out at some point in the future, once the emergency has subsided.

+10

Apr 14th, 2020 11:42 am

angryaudifanatic [OP]: Deal Addict; Nov 10, 2018; 3976 posts; 4157 upvotes

Apr 14th, 2020 11:42 am

smacd wrote: ↑ No. Whether or not you have a rainy day fund has no bearing on who can apply for the CERB. It is for people who have been put out of work due to covid-19. If I'm not able to work or run my business, should I tap all of my funds that I was prudent enough to put away first and risk losing my business before I ask for help? IMHO, the idea of the CE(for Emergency)RB is to get money out to people immediately, to avoid as much disruption to the economy as possible. Taxes owing in 2020 can be sorted out at some point in the future, once the emergency has subsided.

It is my personal opinion that people who don't need CERB shouldn't apply, but that's a personal opinion. That said, the premise of the question wasn't in regards to what you're talking about. The premise of the question is based on people who had no choice but to apply to CERB to keep the lights on - the same group, who by nature of having no choice, most likely didn't have a rainy day fund. If they spend all of the CERB money as they did their own money, what's to state that they will pay back taxes?

IMO, the CERB should have been "usual" taxable income, but that's neither here nor there.

For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.

+1

Apr 14th, 2020 11:53 am

cgtlky: Deal Fanatic; Jan 31, 2006; 7072 posts; 1784 upvotes; Toronto

Apr 14th, 2020 11:53 am

angryaudifanatic wrote: ↑ It is my personal opinion that people who don't need CERB shouldn't apply, but that's a personal opinion. That said, the premise of the question wasn't in regards to what you're talking about. The premise of the question is based on people who had no choice but to apply to CERB to keep the lights on - the same group, who by nature of having no choice, most likely didn't have a rainy day fund. If they spend all of the CERB money as they did their own money, what's to state that they will pay back taxes?

IMO, the CERB should have been "usual" taxable income, but that's neither here nor there.

AGREED ON THIS. Do not join the parade if you are not needed.

+2

Apr 14th, 2020 11:54 am

smacd: Deal Fanatic; Oct 6, 2007; 8697 posts; 5623 upvotes; Kootenays

Apr 14th, 2020 11:54 am

It's my understanding that it is "usual" taxable income...there's just no deduction at source. Plus, Revenue Canada has a pretty good record of getting what's owed to them in the future.

+1

Apr 14th, 2020 12:01 pm

skeet50: Deal Addict; Jan 15, 2017; 3909 posts; 3363 upvotes

Apr 14th, 2020 12:01 pm

The CERB is not tax free. You are correct that income taxes are not deducted at source. Is this a problem for many people? Yes. And I agree with your rationale. Many of the people who applied have not saved any money and there is little reason to believe that they will put aside a portion of the CERB to pay the eventual income tax bill. This means when they file their income taxes next year they will owe money.

And we know how many Canadians erroneously think about income tax - getting a refund is far better than owing money. So there are going to be many unhappy tax payers next year who will blame the gov't for deducting income taxes at source for their tax bills. They will not see that the gov't is essentially giving them more money now to help them when they most need it.

+5

Apr 14th, 2020 12:09 pm

gr8dlr: Deal Guru; Sep 1, 2005; 12505 posts; 7269 upvotes; Markham

Apr 14th, 2020 12:09 pm

The crazy part is there's no penalty of any sort for applying and collecting CERB. So in effect ppl are applying for it (even if they aren't entitled), getting it and just presuming CRA may or may not come back to them. If they come back, just give them the money back. If they don't come back, it's a win fall.

I really wished they just treated this as a interest free "tax advance" ....repayable over X number of years. Simpler. And if ppl don't file, they'll get an tax assessment next year saying they owe $X.

We're all bozos on the bus until we find a way to express ourselves...

Failure is always an option...just not the preferred one!

+8

Apr 14th, 2020 12:16 pm

danman227460: Deal Addict; Sep 24, 2007; 2583 posts; 138 upvotes

Apr 14th, 2020 12:16 pm

I read that it they have 6 years to collect on anyone abusing the system. Now I am curious if that is true. Especially if you are caught and they decide to levy a fine against people who abused the system.

gr8dlr wrote: ↑ The crazy part is there's no penalty of any sort for applying and collecting CERB. So in effect ppl are applying for it (even if they aren't entitled), getting it and just presuming CRA may or may not come back to them. If they come back, just give them the money back. If they don't come back, it's a win fall.

I really wished they just treated this as a interest free "tax advance" ....repayable over X number of years. Simpler. And if ppl don't file, they'll get an tax assessment next year saying they owe $X.

Apr 14th, 2020 12:17 pm

smacd: Deal Fanatic; Oct 6, 2007; 8697 posts; 5623 upvotes; Kootenays

Apr 14th, 2020 12:17 pm

gr8dlr wrote: ↑ The crazy part is there's no penalty of any sort for applying and collecting CERB. So in effect ppl are applying for it (even if they aren't entitled), getting it and just presuming CRA may or may not come back to them. If they come back, just give them the money back. If they don't come back, it's a win fall.

IIRC, there was a check box at the end of the application that stated that you qualified by all of the standards listed and if it came out that you misrepresented and did not qualify, you paid it back and there was a penalty. I could be wrong, though.

+1

Apr 14th, 2020 12:21 pm

angryaudifanatic [OP]: Deal Addict; Nov 10, 2018; 3976 posts; 4157 upvotes

Apr 14th, 2020 12:21 pm

There was no reference to a penalty which is what is most absurd about all of this.

Sure the CRA can audit anyone they want but that's assuming they have the time/money/energy to go after people who aren't making a lot of money. That aside, this same group of people probably don't fear the CRA anyways due to the relatively lower income.

AT THE VERY LEAST, I would have expected collecting interest on money that shouldn't have been collected. This Liberal government, man..

Last edited by angryaudifanatic on Apr 14th, 2020 10:35 pm, edited 1 time in total.

For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.

+3

Apr 14th, 2020 12:29 pm

thexdriver: Member; Jun 4, 2018; 395 posts; 278 upvotes; Windsor/Essex Ontari…

Apr 14th, 2020 12:29 pm

I applied and am not sure I'm eligible. I guess I'll find out sometime in the future.

+3

Apr 14th, 2020 12:45 pm

cgtlky: Deal Fanatic; Jan 31, 2006; 7072 posts; 1784 upvotes; Toronto

Apr 14th, 2020 12:45 pm

danman227460 wrote: ↑ I read that it they have 6 years to collect on anyone abusing the system. Now I am curious if that is true. Especially if you are caught and they decide to levy a fine against people who abused the system.

Its true, CRA can go back 6 years to review your tax return.

Apr 14th, 2020 12:53 pm

thexdriver: Member; Jun 4, 2018; 395 posts; 278 upvotes; Windsor/Essex Ontari…

Apr 14th, 2020 12:53 pm

danman227460 wrote: ↑ Especially if you are caught and they decide to levy a fine against people who abused the system.

It's been made clear that there will be no penalties imposed if CRA at a later date determines an applicant was ineligible.

https://www.huffingtonpost.ca/entry/cer ... e531f055be

A senior Liberal official told HuffPost Canada that Canadians in need can apply for the CERB without any penalties.

There will be “no fines” for misuse, the official said. The Canada Revenue Agency will send notification to people who have either received too much money or were not eligible for the payments that they have a certain amount of time to pay the money back without penalty, he said.

Apr 14th, 2020 12:59 pm

gr8dlr: Deal Guru; Sep 1, 2005; 12505 posts; 7269 upvotes; Markham

Apr 14th, 2020 12:59 pm

angryaudifanatic wrote: ↑ There was no reference to a penalty which is what is most absurd about all of this.

Sure the CRA can audit anyone they want but that's assuming they have the time/money/energy to go after people who aren't making a lot of money. That aside, this same group of people probably don't fear the CRA anyways due to the relatively lower income.

AT THE VERY LEAST, I would have expected collecting interest on money that shouldn't have been collected. This Liberal government, man..

This is what I read as well (No penalties) which is why everyone is applying. From what I heard, the check box doesn't even state what the criteria are so it's pretty stupid if you ask me. It should list each criteria and you should have to TICK each box and then it should say if you are lying you owe the money back plus interest or something.

They really should be helping the small businesses as well because it's the businesses that are going to have to still be around to employ these ppl and get them off EI. This should be a INTEREST FREE LOAN instead....just to help ppl off the unforeseen major crisis.

I can't phathom the cost and how we're going to be paying for this.

We're all bozos on the bus until we find a way to express ourselves...

Failure is always an option...just not the preferred one!

+2

Apr 14th, 2020 1:00 pm

Justification: Sr. Member; Feb 17, 2009; 568 posts; 45 upvotes; Hamilton

Apr 14th, 2020 1:00 pm

Even if there are no penalties, they'll probably flag your account for future audits when they find out you lied.

+2

Apr 14th, 2020 1:03 pm

ROYinTO: Deal Addict; Dec 12, 2009; 4565 posts; 2183 upvotes; Toronto

Apr 14th, 2020 1:03 pm

angryaudifanatic wrote: ↑ The people who are collecting this benefit are people who never bothered to put aside sufficient money in the first place in a rainy day fund (either intentionally or not, that's beside the point).

Not necessarily.
I've got money put aside. The cash flow cycles of my business have always swung. I can go 2-3 months with minimal amounts flowing in weekly, yet the bulk of what I've earned all show up in a single week.

I was ordered to shut down mid March. The revenues I would have earned may not show up for 2-3 months. By taking advantage of CERB now, I can keep my reserve funds up. When this is all over and I am allowed to start up again, CERB will be gone & I will have to live off my reserves until the revenues start flowing in again.

I am not that worried about the tax portions due on what I have received as there is almost a year to save for that. What troubles me is that many of my payments due have been kindly deferred to later dates and I don't know what my cash flows will be like on those dates. For example, my professional license is $2300 is due this week & it can be deferred to preset dates later in the year.

My taking the CERB funds now and budgeting appropriately should help me weather out the aftermath. Knowing that I'm getting 2 months of CERB so far has reduced the stress & anxiety of cash flow for 2 months. I just have to remain cognizant that a portion of it has to be paid back later. The taxes collected later work out to a paying fairly high interest loan while forgiving the principle. The question then becomes how will the CRA handle the CERB on the 2020 return?

Following the advice of the Health Experts - I will consider voting for Dougie @ 12:01 AM, five days after the next provincial election.

+7

Apr 14th, 2020 1:06 pm

Chickennbeans: Deal Addict; Jan 12, 2017; 1294 posts; 636 upvotes

Apr 14th, 2020 1:06 pm

smacd wrote: ↑ It's my understanding that it is "usual" taxable income...there's just no deduction at source. Plus, Revenue Canada has a pretty good record of getting what's owed to them in the future.

They're great at getting what is owed to them from individuals, but terrible at getting it back from the richest corporations and individuals. Why would you spend 80% of your effort on the people who owe 20% of taxes? Only government would flip this business concept around.

+1

Apr 14th, 2020 1:14 pm

dreadsoap: Newbie; Feb 29, 2020; 56 posts; 42 upvotes

Apr 14th, 2020 1:14 pm

thexdriver wrote: ↑ It's been made clear that there will be no penalties imposed if CRA at a later date determines an applicant was ineligible.

https://www.huffingtonpost.ca/entry/cer ... e531f055be

A senior Liberal official told HuffPost Canada that Canadians in need can apply for the CERB without any penalties.

There will be “no fines” for misuse, the official said. The Canada Revenue Agency will send notification to people who have either received too much money or were not eligible for the payments that they have a certain amount of time to pay the money back without penalty, he said.

Just wondering... If someone ineligible for the CERB borrows the 8k then returns it when CRA comes asking, would the income tax on the 8k also be rebated?

+1

Apr 14th, 2020 1:25 pm

Guest5666777784: Member; Feb 13, 2017; 369 posts; 348 upvotes; toronto, ontario

Apr 14th, 2020 1:25 pm

Ideally full repayment of CERB ($8,000) should be made mandatory if the recipient's income exceed $100,000 per year.

+4

Apr 14th, 2020 1:37 pm

skeet50: Deal Addict; Jan 15, 2017; 3909 posts; 3363 upvotes

Apr 14th, 2020 1:37 pm

danman227460 wrote: ↑ I read that it they have 6 years to collect on anyone abusing the system. Now I am curious if that is true. Especially if you are caught and they decide to levy a fine against people who abused the system.

From Bill C-13 which created the CERB:

Limitation or prescription period

13 (1) Subject to subsections (2) to (7), no action or proceedings are to be taken to recover money owing under this Act after the expiry of the six-year limitation or prescription period that begins on the day on which the money becomes due and payable.

+4

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