The Canada Revenue Agency (CRA) and Employment and Social Development Canada (ESDC) are sending out CERB repayment letters to those who were not eligible for the CERB payments they received.

CERB debt is an added worry for many Canadians already struggling with overwhelming debts and the rising cost of living.

This guide will show you what to do if you receive a CERB repayment letter and your options if you can’t repay CERB.

What is the Canada Emergency Response Benefit (CERB)?

The Canada Emergency Response Benefit (CERB) provided financial support to working Canadians during the COVID-19 pandemic. Those who met the eligibility criteria received $2,000 every four weeks they were affected.

CERB later changed to a rebooted Employment Insurance (EI) program, with the alternative Canada Recovery Benefit program for those that didn’t qualify.

What is a CERB Repayment letter?

If you weren’t eligible for CERB or there was a mistake, you’ll receive one of the following CERB letters:

  • Notice of Redetermination from the CRA (Canada Revenue Agency).
  • Notice of Debt from ESDC (Employment and Social Development Canada).

The letters are sent to Canadians with debt on their CRA accounts that must be repaid. Canadians who qualified for CERB do not need to pay it back.

Why is the government asking me to pay back CERB?

The CRA began rolling out the CERB program quickly due to the pandemic shutdowns, which resulted in mistakes and many people receiving CERB overpayments.

Many Canadians didn’t meet the eligibility criteria but made honest mistakes, so there are no penalties for those who applied in good faith. There were also errors by the federal government of Canada.

Reasons for CERB repayments

You might receive a CERB repayment letter if:

  • You didn’t meet the eligibility requirements.
  • There was a CERB overpayment.
  • You received extra money by mistake from the CRA or Service Canada.
  • You returned to work early or earned more from employment than expected.

If you received a letter and believe it to be a mistake, contact the CRA immediately and provide any additional information to support your claim.

Changes to self-employed income criteria

When the CERB program began, there was confusion regarding pre-tax income caused by mistakes by the CRA.

As a result, self-employed Canadians that received a CERB payment but mistakenly used their gross income rather than their net income do not need to repay the money if they meet the criteria.

What if you cannot afford to make your CERB repayment?

If the CRA is sending debt letters, but you are unable to make a CERB repayment, contact the Canada Revenue Agency (CRA) to discuss your CERB repayment options.

The CRA is willing to develop an affordable payment arrangement that allows you to repay the debt in installments.

If you receive benefits through Employment Insurance, Service Canada will recover CERB repayments at 50% of your EI benefit rate, but you can ask the CRA to reduce the repayment rate.

What happens if you don’t repay CERB?

The CRA administers tax legislation and regulations for the Canadian government, so they have considerable power to collect taxes and pandemic benefits.

CRA can issue a set-off to redirect owed funds to them.

If you don’t repay CERB or communicate with the CRA to discuss a repayment plan, they can take further action against you, such as the following.

  • Wage garnishment
  • Take money from your bank account
  • Withhold tax credits
  • Stop tax refunds
  • Seize and sell your assets
  • Put a lien on your property.

Before initiating legal proceedings, the CRA must make three verbal attempts and send a written warning to notify you of the action. Once legal action has started, the CRA generally does not withdraw it.

If you cannot make your CERB repayments and need help with overwhelming debt, book a free consultation with a Licensed Insolvency Trustee.

Get debt relief

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Paying back CERB

If repaying CERB benefits would cause financial hardship and leave you unable to pay for necessities such as rent, food, and other bills, you can request assistance under the financial hardship provision.

Some forgiveness options are available if you can’t afford to repay. You can enter into one of two government debt relief programs to forgive unsecured debts, like credit cards, loans and CERB.

A consumer proposal lets you repay your creditors a portion of your debt based on what your can afford, with the rest forgiven. You can combine your debt into affordable monthly payments and protect assets such as your home and car.

Pros and cons of a consumer proposal

Filing for bankruptcy involves surrendering some of your assets which are sold and distributed to your creditors. It is a good solution for low-income Canadians drowning in debt they cannot repay.

A quick overview of filing bankruptcy in Canada.

Both solutions offer immediate protection from all your creditors, known as a Stay of Proceedings. Collection calls stop, penalties and interest are frozen, and wage garnishments are lifted.

Collection calls, wage garnishments and legal action stop.

Only a Licensed Insolvency Trustee can negotiate a consumer proposal or bankruptcy with the CRA.

How much tax will I pay on CERB?

Canadians that received CERB payments are taxed in the year they received them. The amount you received is shown in box 14 of your T4E slip. This amount includes both CERB payments and other EI benefits you received.

You can claim a deduction on your tax return for the year you repaid the money.

Wrapping up

If you receive a CERB repayment letter, the government believes you were not eligible for the program or there was an overpayment or error. You can make a payment plan to repay what is owed.

Contact the CRA to discuss your options if you cannot afford to make payments. Failure to repay the money can lead to wage garnishments, seizure of assets or a lien on your property.

However, alternative options are available, such as a consumer proposal or filing for bankruptcy. Contact a Licensed Insolvency Trustee for a free consultation today.

Get debt relief

Free consultation with a Licensed Insolvency Trustee by video, phone or in person.

  • Experienced trustees
  • Local offices
  • Personalized plan
  • No fees
Get started

It only takes 30 seconds.

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