Ineligible self-employed Canadians who received CERB due to ‘unclear’ information won’t be forced to repay

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OTTAWA – Self-employed Canadians who claimed up to $14,000 in Canada Emergency Response Benefits despite being ineligible will not have to repay the money, National Post has learned.

Employment Minister Carla Qualtrough is set to make the announcement — which marks a 180-degree flip of the government’s previous position — as early as Tuesday, according to sources with knowledge of the file.

At issue was some CERB recipients who applied based on “unclear” eligibility information from the Canada Revenue Agency.

Now, self-employed Canadians who applied and received up to $14,000 in CERB payments in 2020 despite not meeting net income eligibility criteria will not be forced to repay the money.

Furthermore, those ineligible self-employed recipients who have already repaid some or all of the amount to CRA will most likely be able to contact the agency to reclaim it once again — so long as they meet all of the program’s other eligibility criteria — sources said, adding that some final details were still being ironed out as of Monday evening.

The decision is likely to create a major sigh of relief among those self-employed recipients who were facing a claim of up to $14,000 from the federal tax agency, as well as advocates who have argued that the claw backs should be cancelled because the error was caused by confusion from the government.

It also comes just one week after a proposed class-action lawsuit was filed against the federal government on behalf of retired Canadians with self-employment income who fear they will have to reimburse CERB payments they received.

The problem arose from a miscommunication by the CRA last spring as to how much income self-employed Canadians needed to have made in order to be eligible for the $2,000 a month emergency payment.

CERB eligibility criteria demanded that recipients made at least $5,000 before taxes in either all of 2019 or in the 12 months leading up to their application.

Many self-employed Canadians took that as total income before deducting expenses (gross income), as opposed to their net income after deductions (which CRA argues is always how self-employment income has been calculated).

For example, self-employed people can deduct work expenses, such as some equipment needed to do their job or even certain utilities such as cell phone or Internet services, from their total income when filing their taxes.

To make things more confusing, CRA later admitted that its call centre agents were first provided a script that mistakenly said that CERB eligibility was based on gross income. That message was changed only a few weeks after the program was launched.

“The Government of Canada acknowledges that communications on this topic were unclear in the first days after the CERB was launched. This includes both the CERB webpages, and the information provided to call centre agents,” the CRA said in a December statement.

“We regret that this lack of consistent clarity led some self-employed individuals to mistakenly apply to the CERB despite being ineligible.”

Be reassured any good faith mistakes will not be penalized

The decision marks a significant flip from the Trudeau government’s original plan to enforce the claw back of those ineligible payments.

Throughout December and January, multiple media reported statements from Qualtrough saying that debt forgiveness was not being considered for ineligible Canadians who applied for CERB due to the confusion between net and gross income.

“There’s not a conversation happening right now where we would forgive people, where we would not require people who were not eligible to pay it back. No,” she told CBC News in December.

Her comments came after CRA sent out 441,000 “educational letters” to emergency benefit recipients for whom they did not have enough information to confirm their eligibility to CERB.

The letter requested that they either provide additional proof of their eligibility to the program, or be ready to repay some or all of their CERB payments.

It also suggested those who would need to repay that they should do so by Dec. 31, 2020, to facilitate their income tax filing for the year.

The letters, which many received in the days and weeks leading up to Christmas, created quite some concern for those facing the daunting prospect of having to reimburse up to $14,000 to the CRA.

Even Prime Minister Justin Trudeau was forced to come out and reassure recipients that they should not fret over the possible repayment over the holidays.

“We were serious when we said we would be there for people. We didn’t deliver support to millions of Canadians who needed it just to claw it back at Christmas. Be reassured any good faith mistakes will not be penalized, will not be pursued,” Trudeau said during a press conference on Dec. 18.

“We’re going to work with people over the coming weeks and months to ensure that people get the support they need. These letters should not be a source of anxiety for anyone,” he added.

Credits: National Post

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