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Notice of redetermination: solutions for when you can’t afford your CERB repayment

Posted on 3 February 2023

Written by Colin Boulton

If you received Canada Emergency Response Benefit (CERB) but were ineligible for the criteria, you may well have received a notice of redetermination from the Canada Revenue Agency (CRA) to show that you owe CERB tax debt. Following this announcement from the CRA, many Canadians who received CERB over the COVID-19 pandemic are wondering if they will need to make CERB repayments. How do you know if this is really the case? And what if you are unable to make your CERB repayments? This announcement has put a lot of pressure on many Canadians who have suddenly found themselves in the challenging situation of owing unexpected tax debt. Many individuals are worried about repaying government benefits, and most do not have the cash to simply repay a bill they were not expecting. In this article, we explain what a notice of redetermination means, and share solutions for repaying your CERB tax debt.

What is a notice of redetermination?

The CRA announced last year that individuals who owe tax debts on their accounts due to ineligible CERB payments would receive a notice of redetermination. This would show that they have debts owed on their CRA accounts. This means that for some Canadians who thought they were eligible for a $2,000 per month benefit may not actually be eligible. This whole situation has arisen due to the speed at which the CRA tried to roll out the benefit. It allowed individuals to determine their own eligibility criteria for the benefit. For many individuals, they have since learned they were not eligible and will need to repay the tax debt that they received in error. This is all covered within the notice of redetermination.

What happens if I received a CERB overpayment?

If you think you received a CERB overpayment, you should wait until you receive a notice of redetermination. Thankfully, the CRA has confirmed that there will not be any penalties or interest on CERB repayments unlike other tax debts. You may have received a CERB overpayment because when the CERB was initially announced, individuals could apply via Service Canada or the CRA. Some Canadians applied for CERB through both of these channels, often by accident, and received a double payment. If you are unsure of whether or not you received a CERB overpayment, you can check via the CRA’s CERB repayment tool. If it turns out that you do owe a CERB overpayment, do not panic. We cover your options if you feel you would struggle to make your repayments. At Spergel, we have helped over 100,000 Canadians gain debt relief, and we are here to help you too.

How do I know if I was not eligible for CERB?

Firstly, do not panic. No matter how bad you may feel your financial situation is, there is always a solution. You are also certainly not the only one in this boat. The eligibility criteria for CERB was not clear when the program was first rolled out, particularly as the CRA was trying to expedite the process. For this reason, many individuals applied for CERB thinking they met the criteria, only to discover further down the road that they are not. The primary eligibility criteria for CERB is as follows:

  • If, before the pandemic, you earned at least $5,000 in 2019 or in the year before applying; and
  • If, during the pandemic, your income was impacted by the pandemic and did not exceed $1,000 per month

This criteria has proved particularly confusing for self-employed Canadians. The government has since confirmed that self-employed individuals with an income of less than $5,000 who applied for the CERB will not be required to make CERB repayments, provided they met all the other eligibility criteria. This means self-employed Canadians with a net income of less than $5,000 would not receive a notice of redetermination. Income refers to your paycheque, and not other factors including pension income, disability benefits, student loans, or investment income, for example.

What can I do to repay my CERB tax debt?

There are a few steps you need to follow in order to repay your CERB tax debt:

File your taxes

The first step to resolving your tax situation is submitting your tax return as soon as possible. Once you know exactly the amount of CERB tax debt that you owe, the sooner you will be able to manage your CERB tax debt.

Speak to the CRA

The CRA are unrivalled in their ability to pursue action for late debt payments, from bank account freezes to wage garnishments. For this reason, once you know how much CERB tax debt you owe, it is important to organize a payment schedule that you can afford with the CRA. Communication on how you are managing the payments is important, but you should not let them push you into a repayment plan that is unmanageable or unaffordable for you.

What if I cannot repay my CERB tax debt?

The CRA is treating CERB like any other form of tax debt while being much more lenient on pursuing further action. This means that you have the following options if you have received a notice of redetermination and are struggling to make your CERB tax debt repayments.

Apply for taxpayer relief

If you are unable to pay your CERB tax debt due to circumstances out of your control, you may want to apply for taxpayer relief. These circumstances include situations like a serious illness, a natural disaster, or a loss of employment. Taxpayer relief means that you can waive or cancel any CRA penalties or interest if your application is approved. You may need a Licensed Insolvency Trustee or tax professional for support in making the application.

File a consumer proposal

Thankfully you are able to include your CERB tax debt in a consumer proposal. Consumer proposals are a great way to reduce your tax debt by up to 80%, while keeping your assets. A consumer proposal is a legal form of debt relief in line with the Bankruptcy and Insolvency Act. It is the process of working with your Licensed Insolvency Trustee to establish an affordable monthly repayment. Your trustee will then propose this amount to your creditors on your behalf. If accepted, your remaining debt will be cleared once you have made your monthly repayments for the agreed amount of time, up to five years. It is a great bankruptcy alternative that enables you to significantly reduce your CERB tax debt. It also offers protection from your creditors, including the CRA, via a stay of proceedings.

File bankruptcy

If you are struggling to make your CERB repayments and have explored other debt relief options, filing bankruptcy may be the best option for you. Bankruptcy is the legal process of assigning any non-exempt assets over to your Licensed Insolvency Trustee for liquidation to go towards your creditors in exchange for the clearance of your unsecured debts. This includes eliminating your CERB tax debts. Some of the advantages of filing bankruptcy include offering full protection from your creditors, and enabling you to begin a completely fresh financial future. Most Canadians are discharged from bankruptcy within a little as nine months.

If you have received a notice of redetermination and do not know how to make your CERB repayments, book a free consultation with Spergel today. Our experienced Licensed Insolvency Trustees will help you to understand and explore your debt relief options, from bankruptcy to consumer proposals. Reach out today – you owe it to yourself.

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Colin Boulton

Colin Boulton is a Chartered Accountant and Insolvency and Restructuring Professional with over 20 years’ experience as an LIT (Licensed Insolvency Trustee). He is also our resident expert on unemployment and wage garnishments and manages Spergel's offices in Eastern Ontario (including Oshawa, Peterborough, Lindsay, Ajax and Scarborough). When not at the office helping clients cross their debt-free finish lines, Colin enjoys training for and participating in triathlons.

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