The Canada Emergency Response Benefit (CERB) is widely available to Canadian-resident taxpayers, and you likely have clients who are eligible. However, they may not be aware of the rules governing CERB.
More than 8.4 million people have received at least one CERB payment. These include those who lost their jobs due to Covid-19 or were sick, caring for someone with the virus, quarantined or unable to work because they were caring for children. Workers affected by Covid-19 also include the self-employed, and seasonal or part-time workers or artists.
If your client chooses to quit their job, they wouldn’t be eligible for CERB.
Other criteria apply as well. The individual must be a Canadian resident at least 15 years of age and have income in 2019 of at least $5,000, not necessarily earned in Canada. If they don’t meet the 2019 income criteria, another option is having $5,000 of income in the 12 months prior to application.
There are two ways to apply for CERB: through the Canada Revenue Agency (CRA) or Service Canada. It’s important to ensure your client applies only once. There have been several situations where people applied through both agencies and received double the CERB. The government will eventually realize this happened and require these individuals to repay the extra amount received.
CERB provides a benefit of $500 per week for a maximum of 16 weeks (recently extended to 24 weeks). The government pays $2,000 for each four-week period. If your client applied for CERB through Service Canada, they’re required to submit an internet report every two weeks confirming their situation hasn’t changed. If they applied through CRA, they’re required to reapply for CERB every four weeks. When reapplying, they must confirm they continue to be unable to find employment due to Covid-19.
Many people applied for CERB when it was made available in mid-March, and some will be coming to the end of their 16-week entitlement in early July. With many still unemployed, Prime Minster Justin Trudeau has extended CERB entitlement by an additional eight weeks, for a total of 24 weeks.
Coordination with EI, other benefits
If your clients were eligible for EI prior to March 15, 2020, they’ll receive EI, not CERB. If they become EI-eligible after that date, they’ll receive CERB regardless of which program provides them with a greater benefit.
If your client currently receives EI, they can’t also receive CERB. They must wait until their EI runs out, and, if they’re still unable to find a job, they can apply for CERB.
If a client on maternity or parental leave doesn’t have a job to return to or isn’t able to find a job, they’ll likely be eligible for CERB. The maternity and parental benefits they received would count toward the $5,000 income eligibility for CERB.
If a pregnant client lost her job due to Covid-19 after March 15, 2020, she would likely be eligible for CERB until she switches to maternity and parental benefits. The number of weeks of CERB she receives won’t affect the EI, maternity or parental benefits she’d be entitled to.
If a client diagnosed with a serious illness after March 15, 2020, is unable to work as a result of the diagnosis, they’ll receive CERB for a maximum of 24 weeks. If they continue to be unable to work, they may be eligible for EI sickness benefits after the 24-week period.
Back to work — now what?
Another issue that could arise is when clients received CERB and then went back to work because their employers were able to rehire them through the Canada Emergency Wage Subsidy (CEWS). The government has stated that someone cannot receive CERB if their employer retroactively applied for CEWS.
For example, consider an employee laid off on April 12, 2020, who decides to apply for CERB. They receive a $2,000 payment, which represents the first four weeks of the CERB benefit. Their employer qualifies for CEWS and applies retroactively to April 12, 2020, when the employee was laid off. In this situation, the employee would be required to repay their CERB, as they can’t receive CERB while their employer receives CEWS.
With that said, whether the client is required to repay CERB depends on whether the return to work is in the first four-week period they claimed CERB. If it is and they earn more than $1,000 in two consecutive weeks in the first four-week period, they’ll be required to repay CERB. If they’re in the second four-week period, they’ll need to repay CERB if they earn more than $1,000 any time during that four-week period.
Don’t forget the tax
Normally, when taxpayers receive taxable payments, the government withholds tax. That’s not the case with CERB; your clients receive the full $2,000 payment. This may lead some to believe this benefit is tax-free.
CERB is a taxable benefit that will be included as income on clients’ 2020 tax returns, so they should set money aside to pay this tax bill.
If they don’t plan for the additional tax, they could have an unexpected tax liability come April 2021.