Many self-employed Canadians, who received CERB payments from the government in the first 2 quarters of 2020, the CRA notified in the 3rd quarter of 2020 that those who received such payments were ineligible because they had not earned self-employment income of $5,000 in 2019. This is where the question arises and the debate began as to whether it is the gross or net self-employment income of $5,000 that was eligible for CERB payments.
Gross Vs. Net Self-Employment Income
The CRA considers the $5,000 ‘Net’ for the self-employed and ‘Gross’ for the employment income. Net self-employment income means the income that you get after deducting all your eligible expenses. Those, who received CERB payments based on their gross self-employment income will have to repay all the money to the government as indicated in the CRA notices.
The good news is that the CRA will not reduce your 2020 tax liability by utilizing the amount of your CCB and GST/HST tax credits. This is because many of us are deprived of money to meet our daily expenses. The CRA has taken this decision by considering 4.5 million Canadians who belong to a low and middle-income group so that they can have money with a sense of relief during a tough time. If you will not file your 2020 taxes by the due date, you may lose the chance to get such tax credits. Remember, the filing and the payment deadline for individuals is April 30, 2021, and for self-employed is June 15, 2021. To avoid late filing penalties and interest, you need to ensure that you file your taxes on time.
The CRA has given the leverage of not utilizing tax credits is only limited to 2020 taxes. If you have tax liability associated with the prior year’s tax returns, your CCB and GST/HST tax credits will be utilized to offset your tax liability. If you have realized that you received CERB payment for any specific period that you were not eligible for, you should immediately return it to the CRA through ‘My Account’ or online banking to Canada Emergency Benefit Repayment, or by mailing a cheque to;
Revenue Processing – Repayment of CERB
Sudbury Tax Centre
1050 Notre Dame Avenue
Sudbury, ON, P3A 0C3
If you have already made the CERB repayment to the CRA before December 31, 2020, the CRA will not issue you a T4A slip and you do not need to report that income in your 2020 tax return. If you were eligible for CERB payments, the CRA will issue a T4A slip before March 10, 2021 and you will need to report that income in your 2020 tax return. If you do not receive a T4A slip till March 10, 2021, you should immediately talk to the CRA agent over a phone call at 1-800-959-8281.
If you want GTA Accounting to prepare your 2020 personal taxes, you will need to complete the T1 Checklist to the best of your knowledge. This year, preparing and filing personal income tax returns can be a bit tricky as the CRA has changed and updated its tax rules to transfer the maximum benefit to the taxpayer during the time of this pandemic. Contact us for assistance with your 2020 tax returns.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.