Spent an hour on the phone with the Canada Revenue Agency the other day and I’m neither homicidal, suicidal nor am I going to jail (I think). So, this story has a happy-ish ending.
OK enough with the foreshadowing, it’s time to unravel my tale of woe.
A year ago, when COVID-19 lurched into our lives like a drunk at a wedding … not welcome, not appreciated, but altering everyone’s experience … I was trying to make a few bucks by being another news source in town.
Like everyone else, when COVID-19 hit, things changed.
One of the first things that Ottawa did was unveil the Canada Emergency Response Benefit. It was designed to help people whose income was affected by COVID-19 and there is no doubt it has helped millions of Canadians.
I was hesitant to apply … not because my income wasn’t affected, far from it. Revenue in March 2020 was 33 per cent lower than in February 2020. Revenue in April was down 24 per cent from March. In February, 2020 I had also reached a verbal agreement with a marketing company in town to help promote a slew of community events over the spring and summer. Well, we all know what happened there.
It was clear, and I felt I could make a case for it, that I had been negatively impacted by COVID-19, given that my some of my clients were literally closing their doors.
But that’s not why I was hesitant to apply. I was reticent to apply because it was unclear at the outset whether self-employed people could apply for the benefit.
I hemmed and hawed but eventually applied, paying close attention to whether, as a self-employed person, I was eligible. The first online application wasn’t entirely clear, but I applied anyway and received the benefit … within a couple of days. When I applied for the second month’s benefit, they had changed the application process and it was clear that self-employed people could apply. Yippee!!!
To be honest, I can’t remember whether the application specifically stated that to be eligible a self-employed person had to have a net income more than $5,000 in 2019 or gross income over that amount. Like I said, I was just happy there was a box to tick for being self-employed.
Yippee, let the good times roll. Well, at least until November 26.
That was when I received a letter from my friendly neighbourhood CRA telling me that because my net self-employment income in 2019 was less than $5,000, which is usually a good thing, I was ineligible for the CERB and that I would have to pay it all back . Being helpful, I suppose, they also told me that I should pay it back before December 31, 2020 or I would have to claim it as income for 2020 and be taxed accordingly.
Christmas is the time of giving, so I scraped up my pennies over the holidays and gave to Ottawa. It took two payments, one on December 26 and the other on December 28. Just in time to avoid that pesky little annoyance of paying taxes on money that I, technically, didn’t receive. Whew.
Then, earlier this month, I received a T4A from the CRA listing, lo and behold, the total amount of the CERB as income in 2020.
Turns out that even though I OK’d a pre-authorized debit in late December, the CRA didn’t get around to taking the money out of my account until January 6, 2021. So, according to them, I didn’t refund it by the end of the year.
Hence my phone call to the CRA. It only took four tries to get through, but finally I did. The solution? There really isn’t one. The best they could do was tell me that I would have to claim the income on my 2020 taxes and then, next year on my 2021 taxes, claim a deduction for that amount. How is that going to work? Not sure, things are being developed on the fly.
Amid all this somewhere, Prime Minister Justin Trudeau announced that people who genuinely got caught up in the net-versus-gross misunderstanding wouldn’t have to repay the benefit and, even better, those who repaid it would get it back. Yippee, again.
So I asked the good person at the CRA how that is going to work. First she heard of it, she told me. My heart sank. Wouldn’t be the first time that a profound political pronouncement didn’t reach the beaten-down bureaucrats at the bottom of the food-chain but who actually make everything work.
But, she would check. Yup, turns out I was right and, even better, should could submit my request for me as it appeared that I met all the criteria for a refund of my refund.
So, as you can see, a happy-ish ending to my hour-long phone call with the CRA, although my refund is still ‘in the mail.’
My CRA person, however, did warn me that the refund of money received in 2020, given back, but still taxed, will likely show as income in 2021 because that’s when the money will be deposited.
She didn’t have an answer as to how that will work on next year’s taxes. In theory, I will report the amount as income in 2020 and pay taxes on it. In 2021 I’ll actually receive the money, claim a deduction for the amount but likely get another T4A next year because that’s when the money arrived and then … probably spend another hour on phone with the CRA next year.
And they say taxes are complicated.