CERB fraud shows the importance of identity protection
Beyond the fact that people fell victim to identity theft, tax season is further complicating matters because now the CRA expects taxes to be paid on that money, even if the “recipient” didn’t get anything.
And the way the CRA works is they expect you to pay taxes on the fraudulent cash as normal, with a potential credit coming down the road once their internal investigation is complete.
But for many Canadians, adding a few thousand dollars to their tax bill now (or risk facing interest charged on the amount the CRA says you owe) is no small thing.
More than ever, it’s crucial that you defend yourself against identity theft. Many services offer a free credit report along with identity protection to help you keep your personal information safe.
The CRA website also has tips to help you protect your CRA account which include using complex passwords, Create a PIN — which can also be used in calls with the CRA — and signing up for email notifications so you know when a change is made to your account.
CERB money is taxable
Because CERB payments are considered income by the CRA, the money is taxable. However, unlike with EI benefits, no taxes were taken from CERB payments as they were sent out (EI benefits are taxed before you receive them, similar to paycheques). Instead, the taxes are being charged on the money now, at tax time.
This means that victims of this CERB fraud who, according to CRA records, received thousands of dollars in CERB payments are responsible for paying taxes on that money as the CRA investigates the matter.
In some cases, Canadians are being told they owe thousands of dollars in taxes on benefits they didn’t apply for, need or receive.
Being a victim of fraud can have a devastating effect on your credit score. Monitor your credit score to stay on top of your finances and detect potential fraud as early as possible.
Even for the thousands of Canadian who received CERB payments without being victimized by scammers, those benefits can mean a bigger tax bill than expected.
If you received CERB payments and are concerned about the effect it could have on your taxes this year (or if after everything that’s happened in the past year you’d rather not add doing your own taxes to your plate), consider having your taxes completed by a tax expert this year. Knowing that you’re in professional hands could add some much-needed peace of mind.
The CRA has given taxpayers interest relief
One bit of good news in all of this is the fact that the CRA has announced that it’s giving Canadians relief on interest on the taxes they owe if they’ve received CERB benefits in 2020.
If your total taxable income for 2020 was less than $75,000 and you received either CERB, the Canada Emergency Response Benefit, the Canada Emergency Student Benefit, the Canada Recovery Benefit, the Canada Recovery Caregiving Benefit Canada Recovery Sickness Benefit, Employment Insurance benefits or provincial or territorial emergency benefits, then you won’t have to pay interest on any tax owing until April 30, 2022.
Keep in mind that you still have to file your tax return by this year’s deadline of April 30 to qualify for interest relief.
Basically, prepare and file your taxes now and if you owe the government money, you have a full year to pay it off without being charged interest.
It’s also worth noting that this is only for taxes owing for 2020 and not on any prior or other debts with the CRA.
Is your tax bill bigger than expected?
Getting hit with a big tax bill can be a big blow to your finances. If you’re stuck with a higher tax bill than you were expecting, you can look into ways to earn some extra money.
Start a side hustle you enjoy: If you’re finding yourself in a tough spot this tax season and need some extra cash, consider taking up a freelance gig on the side using skills or hobbies you already have.
Revisit some of your monthly bills: Another option is shopping for a lower mortgage rate when it comes time to renew. Shopping around frees up some additional money to help cover that tax bill — and you might get a better rate for yourself, with rates remaining near recent record lows.
Spare change in your spare time: You can also make quick money doing simple things like filling out surveys, watching videos and surfing the internet.