How to Repay CERB: A Complete Guide

_{By Bromwich+Smith Staff | 2260 words | Reading Time: 11 minutes | Last update: 2024/03/13}

Over the past 3 years, the Covid-19 pandemic has affected everyone worldwide. Canadians were affected in many aspects from health implications, the loss of loved ones employment status and change to their finances. The Canadian Government introduced the CERB Benefit that allowed Canadians to stay afloat during the unknown of the pandemic The basic eligibility was that you must have stopped working as a result of reasons related to COVID-19 and earn less than $1,000 in employment or self-employment income within the 4-week period for which you apply. CERB is a taxable income and now some recipients are being pursued by the CRA to pay their taxes as they were deemed ineligible to receive CERB after the fact. This is leaving a lot of people feeling overwhelmed, and unable to manage their CRA debt. 

Keep in mind that when you owe the CRA money, they also charge penalties and interest on unpaid amounts. This includes a late filing penalty of 5% plus 1% of your balance owing each month. This will apply to taxes owed, but currently there will be no interest charged to CERB related benefits if they are repaid within the deadline.
For CERB payments received through Service Canada, the deadline to repay without incurring penalties or interest is December 31, 2022. For CERB payments received through the Canada Revenue Agency (CRA), the deadline to repay without penalty or interest is December 31, 2023.

To ensure that you are not endangering any other CRA benefit payments, it is important to contact the CRA directly to make a payment plan for any outstanding money owed. The CRA has indicated that they will be working with individuals to create workable payment plans so ensure you are not putting yourself in further financial distress.

The repayment process for CERB is straightforward. Any individuals who need to make a repayment will receive a notice from the government indicating the amount they need to repay. The government has set up a repayment plan that takes into account an individual's financial situation and ability to repay the overpaid CERB benefits. You will be able to login into your CRA account online to make a lump payment through your online banking or receive information on where to mail a cheque.

You may have options if you cannot pay due to circumstances beyond your control. In cases of undue hardship, you may be able to postpone paying your COVID-19 benefit debt until your financial situation improves. You may qualify for CERB repayment assistance. If you are wanting to inquire, head to the CRA website and  complete a simple online form. This form will ask for information about their financial situation and ability to repay the overpaid benefits. Based on this information, the government will determine the best repayment option for the individual.

You need to contact the CRA if you:

1. Have to make any changes to upcoming payments including dates or amounts.

2. Are unable to repay the amount owed.

Can the CRA initiate a wage garnishment on CERB debt? 

A wage garnishment is defined as a legal procedure in which a court order mandates that an employer withhold a person’s earnings for the payment of a debt. The CRA has the authority to garnishee your wages over tax debt.  At this point, they have indicated that they will not be acting on this as a means to collect repayment. Be aware that this decision may change at any point, which is another reason why it is important to have a payment plan in place. For any CRA debt, the amount the Canadian Revenue Agency (CRA) can garnish depends on your filing status, including the number of dependents you have and the amount of deductions you have.

A basic understanding is that you can be garnished at up to 50 per cent of your income as an employee or 100 per cent as a contractor and the CRA does not need to take you to court to do so. The CRA also has the legal right of offset which means they can recover money owed to them by taking it from your business and personal bank accounts directly without prior permissions from you. They are also able to collect through additional benefits you may receive. Many Government benefits are based on your income, which is one reason why it is important to ensure you have filed your taxes. Bromwich+Smith clients are eligible to receive 20% off their Tax filing through H&R Block 

Understanding CERB repayment assistance is available is an important step for eligible recipients to make informed decisions and avoid financial difficulties in the future. We recommend seeking professional advice from a financial advisor or tax expert if you have any questions about the repayment process or have questions on the expectations from you. The COVID-19 pandemic has had a significant impact on the economy, and many individuals are struggling to make ends meet. On top of all of the current price increases to mortgages, food costs, gas prices and more having to add repayment of benefits can be a significant financial burden. With the right information and planning, you can avoid financial difficulties and manage your repayment process.

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Your CRA Debt Options

If you are experiencing CRA debt issues, speak with a Licensed Insolvency Trustees (LIT) as they are the only individuals that can negotiate with the CRA on your behalf.  They will study your financial circumstances with you and provide the best solution for your specific needs. No two situations are identical, and a trusted LIT will be able to help you understand all options, and explain the benefits or downsides to all choices.

Available tools for debt relief payment 

In Canada, there are numerous tools for those dealing with overwhelming debt. Make sure to read online and speak to others about their experience to find the solution that best fits your unique financial situation.  

1. Consumer Proposal. A Consumer Proposal is a legally binding federally regulated debt relief program in Canada. It allows you to reduce the total debt owed by negotiating a repayment plan with your creditors through a Licensed Insolvency Trustee. After the agreed upon debt has been paid the remaining debt will be forgiven. 

2. Bankruptcy. As with a Consumer Proposal,  bankruptcy is a legally binding federally regulated debt relief program in Canada. It involves surrendering any non-exempt assets to be liquidated and the proceeds put towards your outstanding debt. It is typically viewed as the last available option but for many it is a necessary option to eliminate overwhelming debt. 

3. Credit Counselling. In Canada there are free or low-cost counselling organizations that may be able to help you manage your debt. They offer advice and financial education and may be able to negotiate with your creditors on your behalf. During a federally regulated debt relief program like a Consumer Proposal or bankruptcy you will receive two credit counselling sessions at no charge. These sessions will focus on budgeting, and how to achieve your financial goals.  

4. Debt Consolidation. Debt consolidation is a process of condensing all your debts into a single loan typically with lower interest rates. This allows you to simplify payments with the hopes of reducing the total interest paid. 

5. Debt Settlement. Debt settlement refers to the process of negotiating directly with your creditors to settle your debt for less than what is owed. This typically requires a lump sum payment which may not be a feasible option for some. 

6. Licensed Insolvency Trustee (LIT). A LIT is a professional authorized by the government to administer Consumer Proposals and bankruptcies in Canada. They are able to outline your debt relief options and guide you through finding the right solution for your unique situation. 

7. Government program. Depending on your unique situation you may qualify for various government debt relief programs. During the covid-19 pandemic the Government of Canada introduced income support programs including CERB. It has been determined that many Canadians were not in fact eligible for these programs and are now being required to make repayment. If you believe that you were in fact eligible for these programs but have received a letter requiring repayment it is best to contact the CRA directly to determine next steps.  

Do I need to repay CERB? 

If you have received documentation from the CRA outlining that you are required to repay your CERB it is important to contact the CRA. Failure to repay any portion as required may have adverse consequences including additional interest and penalties on the outstanding balance. If you continue to ignore requests to make payment the CRA will have the ability to take legal action against you including court actions, wage garnishments or liens on any property you own. Failure to repay may impact your eligibility for future government programs including but not limited to the Canada child benefit and GST credits. Once you file your current year taxes the CRA can deduct from your tax refund and applying towards your CERB repayment without your consent. Any unpaid debt including government or tax debt will impact your credit rating which may make it more difficult to secure loans or credit with best interest rates. 

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What are the tax implications of receiving CERB? 

The Canada Emergency Response Benefit was introduced to assist those affected by economic impacts of COVID-19. While it aided many individuals, it is important to be aware of the tax implications associated with these benefits. CERB is considered a taxable income, meaning the amount that you received must be added to your total income for the tax year in which you received the benefit. Unlike your employment income, these payments did not have any tax withheld, meaning you may be required to pay taxes on any CERB income once you file your tax return. Additionally, CERB is subject to both federal and provincial taxes depending on where you reside. Another consideration is that the addition of CERB may have pushed you into a higher tax bracket which may have increased the total amount of tax you are required to pay. 
 
When filing your taxes, you are required to report CERB payments on your tax return including the initial payment and any extensions or benefits you received thereafter. You will receive T4A slip from the Canada Revenue Agency outlining the amount of income you received. If it has been determined that you have been required to pay any portion of the CERB credit back, the repayment may be shown on your tax return. 

Remember that you are not alone. Bromwich+Smith has a number of debt relief strategies to help you regain control of your finances and get your life back on track. Reach out today for a free, confidential, no obligation consultation. Bromwich+Smith’s Debt Relief Specialists are available by phone at 1.855.884.9243, or request a call back at contact us page. 

FAQ Related to CERB Repayment:

1. What is the CERB Repayment program and who is eligible for it?

The CERB Repayment program is a government initiative that allows individuals who received the Canada Emergency Response Benefit (CERB) during the COVID-19 pandemic to repay any amounts they may have been ineligible for or received in error. Eligible individuals include those who received the CERB but were later found to be ineligible due to reasons such as not meeting the eligibility criteria or those receiving other forms of income support and not meeting the eligibility criteria or those receiving other forms of income support.

2. How do I know if I need to repay the CERB?

If you received the CERB, you may need to repay it if you later found out that you were not eligible, such as if you earned more than $1,000 in employment or self-employment income during a CERB eligibility period, or if you applied for the benefit but did not meet other eligibility requirements. If it is determined that you are required to repay all of, or a portion of the CERB benefit you will receive a letter in the mail.

3. When is the deadline to repay the CERB?

The deadline to repay the CERB depends on when you received the benefit.
For CERB payments received through Service Canada, the deadline to repay without incurring penalties or interest is December 31, 2022. For CERB payments received through the Canada Revenue Agency (CRA), the deadline to repay without penalty or interest is December 31, 2023.

4. What is the process for repaying the CERB?

The process for repaying the CERB depends on how you received the benefit. If you received the CERB through the CRA, you can repay it online through your "My Account" portal or by mailing a cheque to the CRA. If you received the CERB  through Service Canada, you can repay it by mail, in person at a Service Canada office, or by phone.

5. Can I make a partial repayment of the CERB?

Yes, you can make a partial repayment of the CERB if you are not able to repay
the full amount.

6. How do I report my CERB repayments to the government?

If you repay the CERB through the CRA, the repayment will be automatically
 applied to your account. If you repay the CERB through Service Canada, you will
 need to provide proof of repayment by submitting a copy of your cheque or a
 receipt of payment.

7. Can I use the My Account portal to repay the CERB?

Yes, if you received the CERB through the CRA, you can repay it online through
your My Account portal.

8. What happens if I am unable to repay the CERB by the deadline?

If you are unable to repay the CERB by the deadline, you may be subject to
penalties and interest charges. The CRA may also take other actions to collect the
 debt, such as withholding tax refunds or garnishing wages. It's important to
contact the CRA or Service Canada as soon as possible if you are unable to make
 your repayment by the deadline to discuss options.