71. CERB & How It Works

71. CERB & How It Works

71. CERB & How It Works

Join us as we make sense of the Canada Emergency Response Benefit (CERB).

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CERB & How It Works

On today’s episode we have an in-depth look at the Canada Emergency Response Benefit or CERB for short. Our episode today may be a little longer than usual but I feel that it’s important to dig deep into the details of this new benefit and answer some of those hard to answer questions.

So on the highest level, this benefit is meant to help alleviate the cash flow crisis that many households are experiencing. This crisis is characterised by a drop of household income matched with expenses that stay similar or increase to what they were pre-crisis.

Now, this can be fine if expenses stay below the income, but can be devastating if expenses exceed income – creating what is called a negative cash flow.

This negative cashflow can then force a household to pull from their resources, cause them to not meet financial commitments, lead to debt and lead to an unhealthy amount of stress. So the CERB program is a first run effort at alleviating these issue. This new program replaces the previously announced emergency care benefit and emergency support benefit.

Before we jump into the details, it’s important to point out that there are lots of serious holes in this new program and it leaves millions of Canadians unprotected. Thankfully, the federal government has recognized this and stated that they will announce modifications to the program that will cover those that are still working but at reduced hours in the near future.

How Does CERB Work?

This new plan offers a taxable $2,000 payment for a four-week periods and lasts for up to 4 payments or 16 weeks. This program is available to employees, contract workers and those that are self-employed from March 15th and ending on October 3rd.

To qualify, the applicant must have stopped working due to COVID-19 or are eligible for Employment Insurance regular or sickness benefit.

The application process is pretty straightforward and can be completed online or over the phone consisting of a simple attestation that has a self-declare confirming that the qualifications for the program are met. Anyone that applies will be approved, but these details will be confirmed at a later date and payments can turn into a loan if an applicant is found to not qualify.

Applications themselves are already accepted and those with direct deposit already set-up with the government will receive their payments within 3 business days and those receiving the mailed cheque will receive it in up to 10 business days. To control the flow of applications, applicants are directed to apply on a day associated with their birth month.

An important detail about this program is that the income is fully taxable but taxes are not withheld up front. Instead income taxes will become due when applicant files their 2020 taxes in the spring of 2021. The amount that needs to be put aside depends on how much you’ve earned throughout the year and is based on your marginal tax rate. For most individuals this will be about 20 to 30%. So in other words, it’s important to plan for this tax bill that can easily be close to a couple thousand or more.

Who Can Qualify?

To qualify, the applicant must be 15 years of age or older and reside in Canada. They must also must have ceased receiving income directly due to COVID-19 and have earned at least $5,000 in 2019 or in the 12 months prior to the application.

The loss in income can be due to job loss, quarantine, sickness, taking care of a sick family member or taking care of a child due to them being sick or being out of school/daycare. The direct cause of this must be due to COVID-19. Those that are also still employed but without any work hours are also eligible.

I’ve been getting quite a few questions about these qualifiers. So the $5,000 dollars in earnings can come from a combination of income from being an employee, contractor, business owner, or for those not qualified for EI – maternity and parental benefits.  Interestingly, foreign income can also be used as a qualifier.

Those that are not Canadian citizens can apply and the government has made it clear that those that are temporary foreign workers and even foreign students can receive the benefits if they meet the other criteria.

Unfortunately, this brings us to the first big shortfall of the program. That students without work but expecting to work over the summer and those looking for work do not qualify. We’re seeing lots of individuals that were not employed when COVID-19 hit but were planning to work or looking for a job have their career prospects dry up and not be eligible for any benefits.

Another important detail is that you couldn’t have voluntarily quit from a position and this is putting some individuals in uncomfortable situations as workers may feel forced to work in unsafe environments. This issue hasn’t been discussed too heavily, but will likely grow in magnitude and will lead to many legal cases.

While on CERB

To also qualify, one’s work also needs to cease for a set period of time. The Federal government has set multiple four-week periods that applicants can apply to. The dates of these periods have been previously set by the government.

During these periods there are two sets of rules to how any income, if any, is treated. For the first period that an individual applies to the CERB, they must not have had worked or had income for 14 consecutive days within the pre-determined time periods. In all of the subsequent periods, one cannot have any work or received income at all.

While not confirmed through any official releases, CRA representatives are stating that you could not have worked during this period and any payments received afterwards will not affect an application. This detail has not been conformed, but it does follow the accrual accounting method that the CRA employs.

For each period, one will also need to complete an attestation to receive the funds.

A few questions still linger with what forms of income a recipient of the CERB can receive. While there are no official confirmations, it seems that those that collect CPP and meet all other qualifications are eligible. Also, it’s also unknown how CERB will interact with other provincial benefits like disability benefits.

Applied For Or Receiving EI?

One of the other biggest areas of confusion for individuals has been the interaction between EI and CERB. Those that are EI eligible and made a claim through the Service Canada systems are being confronted with some confusing processes and a phone line that is next to impossible to reach someone on.

The EI benefits that are being used for COVID -19 are EI regular – which is payable to those due to job loss and EI Sickness benefits – which are payable to those that are unable to work due to a sickness of some sort. All other EI programs – such as maternity or parental leave continue the regular EI process.

Those that became eligible to claim EI on March 15th or later and applied through Service Canada will automatically be put into the CERB program and those eligible before then will be receive EI under pre-existing rules.    

All EI eligible individuals that have not applied through Service Canada are now directed to apply through the CRA portals.

Those that became EI eligible before March 15th will receive payments under the re existing EI payment rules while those that applied afterwards or through the CERB portal will receive the CERB payment – event if their EI amounts are greater.

For those receiving CERB and still eligible to receive EI at a future date, they will receive their EI benefits after the CERB ends. For those receiving EI, they will be able to receive the CERB prior to Oct 3rd, 2020 if they are eligible at the time.

Applying For CERB

Thankfully the applications are fairly easy at this point, they can be made through CRA MyAccount, and at the number 1-800-959-2019.

Applications are accepted from 6am to 3am daily including weekends. Importantly, if you have a pending application at Service Canada, do not also apply for CERB. There is no communication between the two channels and a double payment will arise.

Also, if you have not completed your taxes, you can still apply for the benefit through the telephone number.

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