Caution: The CRA Can Take Back Your CERB!

The CRA will take back your CERB payment if you received it without being eligible. For now, the CRA’s goal is only to take back the payments without penalizing anyone.

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The CERB payment system was very lenient from the beginning. People could apply on one of two platforms to register for a CERB payment, either with CRA or with Service Canada. And while it was clearly stated that an individual who has already registered with one of the two entities shouldn’t apply with the other, people did, and many of them got double CERB payments.

And it’s not like everyone is hoarding whatever CERB payment they are getting, regardless of whether they are entitled to it or not. But returning the CERB payment was a very long and confusing process, at least until April. Now, people know where to send the payments back if they receive more than they are eligible for.

Can the CRA take back your CERB?

If you are truly eligible and applied through only one channel and didn’t get additional/duplicate CERB payments, then no, the CRA can’t take back your CERB. The CRA will take a piece of it when your taxes are due next year, since CERB payments will add to your taxable income, but they won’t ask you to refund the whole thing, even if you get back on your feet.

As of June, CRA has given out about $43.5 billion in CERB payments. There is a discrepancy in the total applications received and total unique applicants that the government identified; the numbers are 15.44 million and 8.41 million, respectively. Also, the CERB payments are being extended for two more months. This means the government will have to dish out billions more to sustain people who can’t find work.

This is why CRA is so interested in getting the undeserved CERB payments back. The department also established a “snitch” line so that people can anonymously report anyone who’s received the CERB payment even when they didn’t qualify. The CRA needs to replenish its coffers in case it needs to extend the program even further or start something different.

CERB alternative

There is no CERB alternative; it’s literally the last resort for people who don’t have an income or other income sources to rely upon. But those who invested in good times might not need to rely upon CERB at all. For example, if someone had invested $10,000 about 25 years ago in Toromont Industries (TSX:TIH) and selected its DRIP program, they would have been sitting on over $400,000 right now.

That’s a substantial enough sum. Toromont doesn’t offer a very juicy yield, but its 1.81% payout, $400,000 worth of its shares, would yield about $7,474 a year. If someone were to use it as a CERB alternative for six months, it would make over half the $2,000 CERB payment. The rest can be covered by selling its shares. At its current price of $68.5 per share, you would have sold 15 shares to reach $1,000.

The best part is that if we consider its yearly growth of 16% (based on its three-year CAGR), the stock will recover well beyond the sum you would lose by selling the shares. Toromont is a dependable aristocrat with over 30 years of dividend increases under its belt. It has manageable debt, considerable assets, and a decent return on equity of 19.6%.

Foolish takeaway

If you are dependent upon CERB, you should double-check whether or not you qualify for this payment before using it, because if you don’t and the CRA demands it back, you may be in trouble, but once you get back on your feet, you should start working on your finances. Whether you cut your expenses or invest, you should try and save/grow enough money to sustain you in times like these.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned.

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