Recent Updates on Personal Tax Matters

Crowe BGK

The information contained in the below publication was current at the time it was published. The COVID-19 programs evolve continuously, and the relevant information may have changed since publication. Readers are advised to discuss their particular situation with their Crowe BGK advisor.

This publication addresses various announcements made by the Federal Government and the federal tax authorities with respect to individual taxpayers. All important changes from the previous version of this publication are in italics.

Last update: October 6, 2020

I. End of the Canada Emergency Response Benefit (CERB), modifications to the employment insurance program and introduction of new temporary benefits

The Canada Emergency Response Benefit (CERB) ends when a worker has received 28 weeks of benefits or on October 3, 2020, whichever comes first. Workers have until December 2, 2020 to file an application retroactively for the CERB.

The Federal Government also announced changes to the Employment Insurance (EI) program and new income support benefits that will better support all Canadians. Thus, effective September 27, 2020, the government will transition individuals who have been receiving the CERB to a more flexible and generous EI program for those who qualify.

Moreover, the Federal Government is introducing a new suite of temporary recovery benefits to further support workers. New legislation, Bill C-4, An Act relating to certain measures in response to COVID-19, received royal assent on October 2^nd, 2020. Below are the details regarding these announcements.

a. Changes to the EI program

Benefits

EI claimants will receive a minimum benefit rate of $500 per week (or $300 for extended parental benefits) if this is higher than what their benefits would otherwise be.

Regular benefits will be accessible for a minimum duration of 26 weeks.

Hours Credits to Enhance Access to EI Regular Benefit and EI Special Benefits

The EI program will now be available to Canadians with 120 hours or more of insurable work.

Access to EI benefits is normally based on the number of insurable hours an individual has worked in the year prior to their application, or since their last claim. This is known as their qualifying period. However, the Government of Canada recognizes that the pandemic has prevented many Canadians from accumulating the number of insurable hours that is normally required, and is taking action to address this. To help individuals qualify with a minimum of 120 hours of work, EI claimants will receive a one-time insurable hours credit of:

300 insurable hours for claims for regular benefits (job loss)
480 insurable hours for claims for special benefits (sickness, maternity/parental, compassionate care or family caregiver)

The hours credit will also be made retroactive to March 15, 2020 for claimants who were looking to transition early from the CERB to EI maternity, parental, compassionate care, family caregiver or work-sharing benefits but could not establish their EI claim due to insufficient hours.

The hours credit will be available for new EI claims for one year.

Note for Quebec residents

As the Province of Quebec delivers maternity, paternity, parental, and adoption benefits through the Quebec Parental Insurance Plan, Quebec residents are not eligible for the measures relating to maternity and parental benefits.

EI Premium Rate Freeze

The government will freeze the EI insurance premium rates at the 2020 level for two years. Thus, employees will contribute $1.58 per $100 of insurable earnings for two years, and employers, who pay 1.4 times the employee rate, will contribute $2.21 per $100 of insurable earnings.

How to apply

To ensure a smooth transition to EI, the majority of Canadians who received the CERB through Service Canada and who are eligible for EI will be automatically transitioned. Service Canada will contact all EI clients to confirm whether they need to apply or are being transitioned automatically. Clients can also verify the status of their claim in their My Service Canada Account.

Canadians who will need to apply to Service Canada to access EI benefits include:

900-series Social Insurance Numbers holders;
Self-employed workers who have insurable hours from previous employment and who received CERB benefits through Service Canada; and,
Canadians who received the CERB from the Canada Revenue Agency but could have 120 hours of insurable and meet the other eligibility criteria.

As is normally the case, Canadians become eligible for their first EI payment at the end of the two weeks that they are out of work.

b. Introduction of three new temporary benefits

The government implemented three new benefits, which are taxable benefits. These benefits are offered for one year, starting September 27, 2020.

1. Canada Recovery Benefit

The new Canada Recovery Benefit would provide a benefit amount of $400 per week for up to 26 weeks to workers who are not eligible for EI, mainly the self-employed and including those working in the gig economy. More specifically, this benefit would be available to residents in Canada who:

are at least 15 years old and have a valid Social Insurance Number (SIN);
are resident and present in Canada during the two-week period for which the CRB is claimed;
had employment income, net self-employment income or received certain benefits of at least $5,000 in 2019, in 2020 or in the 12-month period preceding the application (depending on the period covered by the application);
have stopped working due to the COVID-19 pandemic and are available and looking for work; or are working and have had a reduction of at least 50% in their average weekly employment/net self-employment income for the two-week period for which the CRB is claimed, when compared to their total average weekly employment income and self-employment income for 2019, for 2020 or for the 12-month period preceding the application (depending on the period covered by the application);
are not eligible for Employment Insurance;
are not in receipt of benefits paid under a provincial plan because of pregnancy, care of a new-born/adopted child, of the Canada Recovery Sickness Benefit or of the Canada Recovery Caregiving Benefit;
sought work during the two-week period, whether as an employee or in self-employment, and did not place undue restrictions on their availability for work; and,
have not quit their job voluntarily (unless it was reasonable to do so) and have not failed to resume working when it was reasonable to do so.

How much is the Benefit

The CRB provides a payment of $1,000 (before tax withheld) for each 2-week period a worker applies for. After the Canada Revenue Agency (CRA) withholds a 10% tax at source, the actual payment a worker can receive is $900 per 2-week period. The 10% tax withheld at sourced may not be all the tax a claimant needs to pay. The CRA will provide all claimants with a T4A information slip for the amount received. This T4A slip will have to be reported on the personal income tax return.

Claimants need to repay some or all of the CRB through their income tax return if their annual net income, excluding the CRB payment, is over $38,000. More specifically, claimants need to repay $0.50 of the benefit for each dollar of their annual net income above $38,000 in the calendar year to a maximum of the amount of benefit they received.

How to claim the Benefit

Workers must apply after every two-week period for which they are seeking income support and attest that they continue to meet the requirements.

Application for the CRB must be submitted online through the CRA My Account portal or by phone through automated toll-free phone line. Applications will be accepted as of October 12, 2020. Claimants should receive their payment within 3 to 5 days for applications made by direct deposit, and within 10 to 12 days for applications by cheque by mail.

A claim must be submitted no later than 60 days after the end of the two-week period to which the benefit relates.

2. Canada Recovery Sickness Benefit

The new Canada Recovery Sickness Benefit (CRSB) provides $500 per week, for up to two weeks for workers who are unable to work because they are sick or must self-isolate due to COVID-19. The benefit is available to individuals who:

are at least 15 years old and have a valid Social Insurance Number (SIN);

are resident and present in Canada during the week for which the CRSB is claimed;

had employment income, net self-employment income or received certain benefits of at least $5,000 in 2019, in 2020 or in the 12-month period preceding the application (depending on the period covered by the application);

have, as an employee or self-employed person, been unable to work for at least 50% of the time they would have otherwise worked in the week, because:
- They have contracted or might have contracted COVID-19;
- They have underlying conditions, are undergoing treatments or have contracted other sicknesses that would make them more susceptible to COVID-19, or
- They isolated themselves on the advice of their employer or a medical practitioner for reasons related to COVID-19;

are not in receipt of Employment Insurance benefits, of benefits paid under a provincial plan because of pregnancy, care of a new-born/adopted child, of the Canada Recovery Benefit or of the Canada Recovery Caregiving Benefit; and,

have not been granted paid leave or been paid under a sickness benefit plan.

Workers are not required to have a medical certificate to qualify for the benefit.

How much is the Benefit

The CRSB provides a payment of $500 (before tax withheld) for each 1-week period a worker applies for. After the CRA withholds a 10% tax at source, the actual payment a worker can get is $450 per 1-week period. The 10% tax withheld at sourced may not be all the tax a claimant needs to pay. The CRA will provide all claimants with a T4A information slip for the amount received. This T4A slip will have to be reported on the personal income tax return.

How to claim the Benefit

Workers must apply after the one-week period in which they are seeking income support and attest that they meet the requirements.

Application for the CRSB are now being accepted by the CRA. Applications for the CRSB can be submitted either:

Online through the CRA My Account portal; or
By phone: 1-800-959-2019 or 1-800-959-2041

Claimants should receive their payment within 3 to 5 days for applications made by direct deposit, and within 10 to 12 days for applications by cheque by mail.

A claim for CRSB must be submitted no later than 60 days after the end of the week to which the benefit relates.

3. Canada Recovery Caregiving Benefit

The new Canada Recovery Caregiver Benefit (CRCB) provides $500 per week, for up to 26 weeks per household to eligible Canadians who are unable to work because they need to provide care to children or support to other dependents who have to stay home. More specifically, to be eligible for the Canada Recovery Caregiving Benefit, individuals need to:

be at least 15 years of age on the first day of the period for which they apply for the benefit and have a valid Social Insurance Number;

reside in Canada and be present in Canada during the week for which they claim the benefit;

have had employment income, net self-employment income or received certain benefits of at least $5,000 in 2019, in 2020 or in the 12-month period preceding the application (depending on the period covered by the application);

have been unable to work for at least 50% of their normally scheduled work within a given week because of one of the following conditions:

they must take care of a child who is under 12 years of age on the first day of the period for which the benefit is claimed:

because their school or daycare is closed or operates under an alternative schedule for reasons related to the COVID-19 pandemic;
who cannot attend school or daycare because the child contracted or might have contracted COVID-19, the child was in isolation on the advice of a medical practitioner, nurse practitioner, person in authority, government or public health authority for reasons related to COVID-19, or the child would, in the opinion of a medical practitioner or nurse practitioner, be at risk of having serious health complications if the child contracted COVID-19; or
because the caregiver who usually provides care is not available for reasons related to the COVID-19 pandemic; or

they must take care of a family member who requires supervised care:

because their day program or care facility is closed or operates under an alternative schedule for reasons related to COVID-19;
who cannot attend their day program or care facility because the family member contracted or might have contracted COVID-19, the family member was in isolation on the advice of a medical practitioner, nurse practitioner, person in authority, government or public health authority for reasons related to COVID-19, or the family member would, in the opinion of a medical practitioner or nurse practitioner, be at risk of having serious health complications if the family member contracted COVID-19; or
because the caregiver who usually provides care is not available for reasons related to the COVID-19 pandemic;

not be in receipt of Employment Insurance benefits, of benefits paid under a provincial plan because of pregnancy, care of a new-born/adopted child, of the Canada Recovery Benefit or of the Canada Recovery Sickness Benefit; and,

not have been granted paid leave or not have been paid under a plan that provides for payment for the care of another person.

How much is the Benefit

The CRCB provides a payment of $500 (before tax withheld) per household for each 1-week period applied for. After the CRA withholds a 10% tax at source, the actual payment a household can get is $450 per 1-week period. The 10% tax withheld at sourced may not be all the tax a claimant needs to pay. The CRA will provide all claimants with a T4A information slip for the amount received. This T4A slip will have to be reported on the personal income tax return.

How to claim the Benefit

Workers must apply after the period in which they are seeking income support and attest that they meet the requirements.

Application for the CRCB are now being accepted by the CRA. Applications for the CRCB can be submitted either:

Online through the CRA My Account portal; or

By phone: 1-800-959-2019 or 1-800-959-2041

Claimants should receive their payment within 3 to 5 days for applications made by direct deposit, and within 10 to 12 days for applications by cheque by mail.

A claim for CRCB must be submitted no later than 60 days after the end of the week to which the benefit relates.

4. Penalties

To promote compliance with the legislation, penalties may be imposed on a person if they:

knowingly make, in relation to an application for a benefit, a representation that is false or misleading; or
make an application for, and receive, a benefit knowing that they are not eligible to receive it.

Penalties can reach 50% of the benefit that was or would have been paid. The maximum of all penalties that may be imposed on a person is $5,000.

Additional consequences can apply where in cases where a person:

for the purpose of obtaining a benefit for themselves, knowingly uses false identity information or another person’s identity information;

with intent to steal all or a substantial part of another person’s benefit, counsels that person to apply for the benefit; or

knowingly makes, in relation to one or more applications, three or more representations that are false or misleading, if the total amount of the benefits that were or would have been paid as a result of the applications is at least $5,000.

II. One-Time Payment to Individuals with Disabilities

The Government of Canada announced a one-time payment in the amount of $600 to cover exceptional expenses incurred by individuals with disabilities during the COVID-19 pandemic. The one-time payment is not taxable to the recipient and will be made by cheque or direct deposit.

In order to be eligible for the one-time payment, individuals must either have an existing valid Disability Tax Credit (DTC) certificate, must be eligible for the DTC and apply for it by September 25, 2020, or must be a beneficiary of certain disability pension plans.

The one-time payment will be automatically issued in the majority of cases. However, individuals whose DTC certificate expired in 2019 or who are eligible for the DTC but simply never applied must apply before September 25, 2020 in order to benefit from the one-time payment. It is important that individuals who wish to qualify for the one-time payment do not wait to complete the application for a valid DTC certificate with their 2020 Income Tax Return, as the deadline will already have passed.

III. Cyberattacks Targeting the Canada Revenue Agency (CRA)

In recent days, the CRA announced that it has been the target of cyberattacks that have forced the agency to temporary suspend access to its online services. Although such services have now been restored, we recommend, as a precaution, that taxpayers consider changing the password used to access the online services. In addition, we strongly recommend that individuals ensure there is a distinction in the passwords used for their various online accounts in order to reduce the risk of being subject to a cyberattack.

Taxpayers whose accounts have been subject to the recent cyberattacks will be notified by way of a letter from the CRA that will be sent via regular mail.

For more information, please do not hesitate to contact your Crowe BGK advisor.