[Last updated: October 16, 2020] We don’t need to tell you how long it’s been since the pandemic was declared - we all know that. We’re here to help clarify updates to the government benefit programs, which we’ve written about in previous blog posts (March 18, March 20, and July 8).
The CERB program, which has allowed eligible Canadians to collect $500/month since March 15, ends September 27 and is transitioning into two programs.
EI
The first of those programs is for Canadians who are eligible for EI (meaning: you worked at a job where taxes were deducted at source). Traditionally, EI benefits are based on how many hours you worked in the past year, how much you were paid and what the unemployment rate is in your region. CRA is making it easier for Canadians to qualify for the benefits and guarantee them a minimum benefit rate. The support comes in three ways:
This is what you’ll see if you head to Service Canada to apply for EI benefits.
One-time insurable hours credit. Canadians who lost their job will get a credit of 300 hours (or 480 hours if you had to leave your job to care for sick family members or were sick yourself).
A base unemployment rate of 13.1% across Canada. Traditionally, regional unemployment rates are used to calculate the number of qualifying hours and length of time you can access the benefits. By setting a base unemployment rate, that makes the number of qualifying hours 420 and a minimum entitlement of 26 weeks of benefits.
Minimum benefit rate. The government has guaranteed a minimum weekly rate of $500 regardless of how much you earned from your previous job.
For those that qualify for EI – you can apply for these benefits through Service Canada, as you would have under “normal” circumstances.
CRB
The next program is for freelance/gig/self-employed workers who wouldn’t qualify for EI (because you didn’t work at a job where taxes were deducted at source). This new program is called CRB (Canada Recovery Benefit).
The CRB goes into effect September 27 and will last for one whole year. It consists of weekly payments of $500 for a maximum of 26 weeks (read: even though it will run for the full year, the maximum you can receive the benefit is for 6 months total within that year).
It has the same qualification requirements as CERB. You must:
Be over 15 years old
Have lost your job (not quit)
Not be eligible for EI
Have stopped working due to COVID and be available and looking for work
Have had income of at least $5,000 in 2019
Have experienced at least 50% reduction in weekly income
Eligible Canadians will need to apply for the benefit for every two-week period.
There are four things to note with regards to this benefit:
If your net income (income less deductible expenses) is more than $38,000 at the end of the year, you will need to repay a portion of the CRB benefit. You would need to repay $0.50 for every dollar above $38,000. For example, if you collected CRB for 10 weeks for a total of $4,000, and your net income at the end of the year is $39,000, you would have to pay back $500 of the CRB. CRB (and CERB) payments are both taxable so they would be included in your annual net income.
How do you know if your weekly income has dropped by more than 50%? This is obviously confusing for self-employed people who don’t earn a regular weekly salary. But the government has offered some guidance to try and help: If you are applying for CRB in 2020, you will compare your income to your average weekly income in 2019. So, you take your total income from 2019 tax return (in majority of cases it will be box 15000 on page 3 of your tax return, or to be more specific the total of boxes 10100, 10400, 135000, 137000 and 139000 - see this PDF for reference), and divide it by 52. Then compare it to the weekly income in the current year’s eligibility period to see if the drop is more than 50%.
For example: Say your total income from 2019 was $52,000. Your average weekly income would be $520 and your bi-weekly average income would be $1,040 ($520x2). If you earned less than $520 TOTAL ($1,040 / 2) in the 2- week period you’re applying for, you would qualify.Scenario A: You get paid $500 for a writing job that takes you two days to work on and those are the only two days you worked in that 2-week period - you would qualify.
Scenario B: You get a consulting gig that pays you $1,000 for 10 days of work. If those 10 days are all within the two-week period you’re applying for, then your income for that period is too high and you don’t qualify for that period. But if those 10 days of work are spread out over a full month, and only two of the days you work on the writing gig are within this particular eligibility period, your income earned in that period is only $200 ($100/day x 2 days) and you would qualify. This goes back to what was discussed in a previous post about earned revenue and timing. It doesn’t matter which day you received the cash, the income CRA is referring to in this eligibility requirement is when you earned it (or when you did the actual work for it).
Taxes will be withheld from CRB payments. This means that for every two-week eligible period, you will receive $900 in your bank account. $100 will go towards your tax payment at the end of the year. Which is a good thing, because these payments are taxable at the end of the year anyway!
Application periods are retroactive. For CERB you applied for the two-week period in advance, but for CRB you are applying AFTER the two-week period. This means that the earliest you can apply for the first two-week period (Sept 27 – Oct 11) is October 12. For this first period, you must attest that you were looking and available for work and didn’t earn more than 50% of your 2019 average weekly income in either week from Sept 27 – Oct 4 or Oct 5 – 11.
Updated October 8: the CRA has added a CRB Q+A on their website—find it here.
Updated October 13: Derrick Chua created a wonderful document to help you navigate these calculations.
Be Prepared for 2020 Taxes
So, now is a great time to get a head start on your 2020 taxes! (Accountants everywhere cheer, you groan). We highly recommend that you begin gathering the invoices and income collected in 2020 and keep a tracking chart to see how much you have earned so far. At the end of the year you will have deductible expenses that will reduce that overall income, but if you know the income earned (aka – gross income) you will at least know the maximum amount of income you will report for 2020. If your gross income is over $50,000, you’ll probably end up with a net income (gross income after deductible business expenses) higher than $38,000 and will have to pay back the CRB.
Got Questions?
We understand that every individual situation is unique and this post can’t address the needs of everyone – if you are a performing artist working in Canada and have further questions, please contact us by emailing Lead Producer Kristina Lemieux (kristina@generatorto.com) and we will consult with you at our next Financial Joy Office Hours session. Please note that at this time we are not able to offer support to folks working outside the performing arts.
