Tag: Canada Revenue Agency

CERB explained

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🇨🇦 Ryan Gauss (@RyanMGauss) | Twitter

This coming Monday, the application portal to apply for the Canada Emergency Response Benefit -CERB- will open.

CRA is already anticipating an overload on the system and has broken down application days by month of birth. The breakdown is here.

The Agency has also provided more details in regards to eligibility. I will kindly summarize them for you.

Some details remain unclear though. I’ll make a note of them too.

Eligibility criteria

To apply, you need to meet ALL of the following conditions:

  • You’re a worker -either employed or self-employed- and your hours have been reduced to zero due to Covid-19
  • You have sustained a total loss of income in the last 14 days
  • You are not expected to earn any income in subsequent periods
  • You are at least 15 years old
  • You reside in Canada
  • You’ve earned a minimum of $ 5 000.00 in 2019; These 5K can come from employment income, self-employment income, EI benefits…They’re not mutually exclusive.

You can’t combine CERB with any other income, except…

The only other income you can receive with CERB is from a province or territory that has implemented support payments in response to Covid-19.

If you are receiving any other type of income, you’re not eligible.

Here is a breakdown for different situations:

Eligible

  • Laid-off because of Covid-19, do or don’t qualify for EI
  • Sick with Covid-19, do or don’t qualify for EI
  • Hours reduced to zero because of virus, either employed or self-employed; do or don’t qualify for EI
  • Taking care of a relative sick with Covid-19
  • Taking care of your children because of schools/daycares closure
  • EI benefits exhausted after March 15th, still not working and earning income
  • Receiving other Covid-19 support payments from province/territory

Not eligible

  • Still working and receiving income
  • No longer working but paid by employer (lucky you!)
  • Employer on wage subsidy program, i.e. paying you
  • Hours reduced but not eliminated, still receiving partial income
  • Job slated to start soon, including students with Summer jobs
  • Receiving any EI benefits: employment, sickness, maternal/parental
  • Receiving pension or income from RRIF
  • Receiving income assistance
  • Receiving disability payments from insurance co. or gvt
  • Students who didn’t have jobs prior to Covid-19
  • Stay-at-home parents prior to Covid-19
  • People who resigned/voluntarily quit job
  • Loss of income/job for other reasons than Covid-19 or prior to March 15th (apply for EI, if you qualify)
  • Unemployed & not on EI prior to March 15th, even if job-searching
  • On unpaid leave of any kind, i.e. not working, not earning
  • Didn’t earn 5K in 2019

As you can see, a lot of people will not qualify for CERB. Many Canadians might be in for a rude awakening.

It’s unclear if you would qualify if a job offer is rescinded due to Covid-19. I guess it would depend on your situation when you accepted the offer.

If you’re eligible for EI, apply for EI first

Technically, you could apply for CERB first, even if you’re eligible for EI. But it’s best to apply for EI first.

It will provide you with benefits for an additional period of time. Once your claim is up, you can then apply for CERB if you’re still not working, and the program is still available.

It’s also unclear whether you will be redirected to Service Canada when applying for CERB and being eligible for EI.

If you have already applied for EI, you don’t need to apply for CERB.

Amount, length and taxes

The amount is a flat $ 2 000/month, regardless of how much you made prior to applying.

It’s available for a maximum of 4 months. You need to re-apply every month.

This benefit is taxable, however CRA will not withhold any income tax.

No documentation required…yet

Upon applying, you only need to certify you meet the eligibility criteria.

However, CRA may ask you for documentation later on. Keep this in mind, particularly if you want to game the system…

Final word

There will be cases that are not listed above. Further clarifications may also be addressed later on. If you apply for CERB, please share your experience by commenting below.

Forgot to file your taxes, now what?

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If you are an employee, the deadline to file your taxes with Canada Revenue Agency was April 30th. If you are self-employed, you have until June 17th to file….but if you owe you had to pay by April 30th.

If you happen to not have filed your taxes by April 30th, you may be wondering what you should do next. Let’s take a look, but first a reminder.

INCOME TAXES ARE LEGAL IN CANADA

Just in case you thought otherwise. It has been so since 1917 when the War Tax Act was first introduced. The act was modified in 1948 to become the Income Tax Act.

Now this is out of the way, here what you need to do if you didn’t file your taxes.

file, whether you owe or not, whether you earned or not

Even if the deadline has passed, you can always file your taxes. Start by doing just that.

It is always a good idea to file, even if you don’t owe money to the government or haven’t earned any money. There are 3 reasons for this:

  1. Qualification for a number of government programs is based on reported income, such as the GST/HST rebate or the Canada Child Care Benefit. If you are not reporting your income, both eligibility and amount for these types of benefits can’t be assessed.
  2. Tax refunds are not automatic. As long as your taxes are not filed, your tax refund will not be released, if you happen to be eligible for one.
  3. Notice of Assessment: if you want to borrow a large amount of money, such as a mortgage, lenders will ask for this document.

if you owe money

You really need to file….and pay what you owe. If you don’t, CRA will come after you at some point. You will also be assessed penalties and interests. They start at 5% of the balance owing plus 1% per month until it is fully paid. The 1% interests compound daily!

If you are a repeat offender, you could be assessed a penalty called “repeated failure to report income”. It currently sits at 20% of the most recent income amount you should have reported. Ouch!

what if you haven’t filed for several years 

Yep. That happens. If this applies to you, you will need to be a bit more proactive.

I suggest you contact CRA and see if its Voluntary Disclosure program could help you. This program will only work if CRA has not already contacted you in regards to your back taxes. If you qualify for the program, you will avoid further prosecution. Penalties will still apply.

Of course, you should file as soon possible! H&R Block and TurboTax can help you file taxes going back several years. You can file them online.

don’t expect your tax problems to go away

This is particulalrly true if you owe the government. The agency can be very aggressive and has a lot of means at its disposal to collect, including freezing your bank accounts, putting liens on properties and/or garnish wages.

The best way to avoid the above ordeal is simply to file your taxes on time. If on one occasion you are unable to do so, don’t let it become the norm. After all, “in this world nothing can be said to be certain, except death and taxes”. Benjamin Franklin (1789). 

After filing your tax return

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Most Canadians don’t really give much thought about what happens once they have filled their taxes with C.R.A. Besides issuing refunds or collecting owed amounts, there are a few steps in between that could impact you.

Pre-assessment review: right after you file, the deductions and credits you claim are reviewed to issue your Notice of Assessment and refund (if applicable). This happens from February to July and is a basic review.

Processing review program: similar to the pre-assessment review, except it takes place from August to December.

Matching program: This is a thorough review of your return. C.R.A. will compare what you filled with the information provided to them by your employer, banks, investment companies or charities. It usually happens between October and March. It may trigger a Notice of Reassessment and adjustments could be made to your RRSP limit or any benefit you are eligible for. It may also change the amount you owe or are owed.

For these 3 steps, it is unlikely C.R.A. will contact you.

Special assessment program, a.k.a. audit: This process can happen at any time, even for past returns. C.R.A. will send you a letter requiring additional documents or information.

If you are contacted, do not ignore the request. If you do, the agency will adjust your return based on their findings, and it won’t be in your favour. You may elect to consult a tax lawyer or an accountant.

There a few common reasons why you are audited:

  • Random selection
  • Discrepancies found during the matching program
  • Past history and reviews

Tax payers are required to keep all returns, records and documents for 6 years.

The agency is aiming for efficiency. Usually audits target a specific group of people or industries, but sometimes it is just “your turn”.

In a nutshell, reviews are very common. My 2011 return was reviewed. I had to reimburse $ 20.00 for an error in the calculation of my CPP amount. The Agency did not contact me prior to issuing a Notice of Reassessment.