Tax Tip Thursday

Time for some more alphabet soup! Today we are talking about CEBA, CERB, and CEWS.

It’s good timing because there or some big deadlines coming up!

CEBA

I talked about it before, but the CEBA repayment is coming up. On January 18, 2024, the repayable portion needs to be back into your banks hands without fail. If you have the money and are repaying it, make sure you do so a few days before the due date. Do not leave it to the last minute!

People are receiving notices from their banks now, notifying them of the repayment requirement. As I discussed in the last show we talked about CEBA, there are options, but you need to make a move.

The RBC is offering a refinance loan of up to $40k as a variable rate loan (which might not be bad going forward) for prime plus 2.15% for 5 years. Right now prime is 7.2%, so you would be looking at 9.35% at least temporarily.

That is not a great rate, but I would expect it will decline over the next couple of years. Unfortunately, it will be costly in the short term, probably around $1000 a month to start, depending on how they amortize the loan.

The other option is to seek out a fixed rate loan elsewhere, eliminating any further interest rate risk (both up or down).

The short story is if you are going to owe the CEBA loan repayment, make sure you take action now to set it up for yourself. It will not be good if you sit on this!

CERB

The CRA is on a rampage and if you did not meet the income requirements for receiving CERB, they are coming after you.

There have been many discussions primarily around the people who are self employed (or claiming to be self employed) and the $5000 income threshold.

To be honest, it was remarkable the number of people that had their 1st year of self employment in 2019 and make just over $5k.

We have had several clients fall into the $5k gross income versus $5k net income from business and unfortunately they are going to have to pay back the money.

There is some talk that CRA will let it slide, but I do not think that will happen.

If you find yourself in the position that you have received a letter from the CRA, you need to prove that you had the income in question.

I have had several people come to me and say that “their company” paid their spouse or adult child as a consultant. They then created invoices to send to CRA. Unfortunately they neglected to actually pay the individual, so there is absolutely no paper trail of funds exchanging hands. This will not fly at all.

Another strategy that people could try if they are caught up in the $5k Gross vs Net is to refile their 2019 tax return and remove all the expenses. There would be a fee for that, but not $20k that will have to be paid back for cerb. The only real tax problem is if you are married and your spouse got a taxable benefit as a result of your low income. They will also be reassessed and potentially have some tax to pay back.

The other thing about this is that the CRA is being lobbied to drop the repayment for those situations given the ambiguity of the initial wording for the income. Some think this will happen and others do not. I don’t think they will change it, but maybe.

Don’t bet on it, though. Could be costly.

CEWS

The last subject is CEWS – this was the wage subsidy that many businesses were able to take advantage of through COVID.

The CRA is on the hunt for businesses that abused this money as well. They have already audited about $5.3 billion worth and only found about $300 million that needed to be reduced or denied. There were $100 billion worth of subsidies handed out, so they still may have more to go. If you are audited, be sure to be as compliant as possible and make sure your documentation supports what you have claimed.

Did You Receive Funds? Are You Getting Audited?

Lots of people are getting audited because of CEBA, CERB, and CEWS. Even if you did not fraudulently claim eligibility for these funds, there is a good chance they are going to look at it. If you are going through one of these audits — even if you shouldn’t have claimed the funds and are going to have to pay them back — please make an appointment with us! We can help you sort through everything, get your ducks in a row, and potentially find some less costly solutions for you.

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.