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CRA Extension Update: You Can Get the New $500 Canada Recovery Benefit (CRB)

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The Canada Emergency Relief Benefit (CERB) was very helpful for Canadians during the initial onset of COVID-19. The Canada Revenue Agency (CRA) announced two extensions to the program to continue helping millions of unemployed Canadians during the lockdowns.

The final eligibility period for CERB ended on September 27, 2020. With the end of CERB, the CRA did not announce further extensions to the program. However, it did create another program to facilitate the people who still cannot generate income: the Canada Recovery Benefit (CRB).

CRB was unanimously approved by the House of Commons and came into effect with the end of CERB. I will tell you about the CERB alternative and how you can create your own CERB-like alternative.

$500-per-week payments

Like the CERB, the CRB pays eligible Canadians $500 per week for a maximum of 26 weeks. The government designed CRB to help residents who lost income due to COVID-19 and do not qualify to receive benefits through the new and improved Employment Insurance (EI) program.

Many people who did not have enough insurable hours, were self-employed contract workers, and were part of the gig economy could not qualify for EI. The CRB’s eligibility requirements make it possible for them to receive the benefits they did not qualify for with EI.

How do you qualify for Canada Recovery Benefit payments?

Like the CERB, the CRB also has a set of requirements that you need to meet to receive the benefits. To qualify, you need to have a valid Social Insurance Number and be at least 15 years old.

Additionally, you must have earned at least $5,000 in self-employed or employed income during 2019, 2020, or in the 12 months before applying for CRB. You must also be available to get back to work and actively searching for opportunities to earn an income so you can qualify for CRB.

People who are eligible for EI cannot apply for the CRB. You also cannot quit your job to receive CRB. The loss of income due to COVID-19 must be 50% or greater for you to qualify for CRB.

Creating your own CERB-like payments

With the CERB gone, CRB presents an excellent option for you to consider when facing your financial challenges. However, the CRB is also going to end, and it is better to create your own solution. The Tax-Free Savings Account (TFSA) is an excellent tool that you can use to create a CERB-like passive income of your own.

After the 2020 update, the total contribution room in your TFSA stands at $69,500. All the income you generate within your TFSA is tax-free, and you can withdraw it without incurring any charges. CERB, CRB, and all other benefits are taxable income, and you will have to pay the CRA for those payments in the next tax season.

Using your TFSA contribution room to hold a portfolio of dividend-paying stocks like Fortis (TSX:FTS)(NYSE:FTS) can help you generate tax-free passive income through dividends. Fortis is a staple of various investment portfolios due to its reliability throughout the year and adverse conditions.

Fortis is a utility sector company that is trading for $54.90 per share at writing. It is paying its investors at a decent 3.58% dividend yield. If you invest $15,000 in the Fortis stock, you can supplement your TFSA account balance with $537 each year through dividends alone. The stock also has the potential to grow over time.

You could focus on reinvesting the dividend you earn into the stock to unlock the power of compounding to boost your passive income significantly. Fortis will also keep increasing its dividends thanks to its reliable and predictable cash flow. Investing $15,000 in Fortis could go a very long way for your passive income.

Foolish takeaway

The CRB is an excellent short-term bridge for people who have lost income and can no longer rely on CERB. However, I would advise creating a long-term solution to generate passive income through a dividend income portfolio in your TFSA. Fortis could be an excellent foundation to begin building such a portfolio.

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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.

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