The Canada Revenue Agency (CRA) made a monumental effort in distributing $2,000 monthly payments through the Canada Emergency Response Benefit (CERB). The program ended on September 27, 2020. It was replaced by the Canada Recovery Benefit (CRB) and Employment Insurance (EI) program to encourage Canadians to return to work as lockdowns eased.
Many people opted to receive CERB money instead of restarting their jobs. The CERB alternatives have a similar payout for eligible Canadians, but they are not as lenient as CERB was.
While CERB is over, the CRA has not forgotten that many ineligible recipients received the money. The government agency is encouraging people who mistakenly received the funds to return their CERB payments voluntarily. Otherwise, there is a risk of penalization.
There are two ways you may have to pay back some or all of your CERB money.
The CERB isn’t tax-free
The CERB is a taxable benefit that the CRA distributed without deducting taxes at the source. It means that it disbursed the entire $2,000 for each four-week eligibility period. These payments will add to the recipients’ taxable income, and they might have to pay some of the amounts back depending on their respective tax brackets.
Reasons you could have to pay back CERB
Another reason you might have to return part or all of your CERB money is that if you received the money for any or all of the CERB eligibility periods without qualifying for it. Here are some of the situations in which you would have to return the CERB money:
- You earned more than $1,000 for the eligibility period.
- You did not have an income of $5,000 or more in 2019 or 12 months before applying for CERB.
- You might have received retroactive payments from your employer through the Canada Emergency Wage Subsidy (CEWS) program.
- You applied for CERB through both Service Canada and CRA to receive double payments.
Consider investing any savings
If you qualified for CERB and received payments for the periods you were eligible for, you might be in the clear. Besides any taxes you might have to pay with your income tax return, you can use the CERB money to manage your expenses. If you have any CERB money left after expenses and have enough to pay back your taxes, I would recommend investing the amount in a reliable dividend stock like Toronto-Dominion Bank (TSX:TD)(NYSE:TD).
Toronto-Dominion Bank is an investment that can keep on giving. It is one of the oldest and most significant financial institutions in Canada. TD has been providing its shareholders with dividend payouts for more than 150 consecutive years. In that time, TD has managed to continue its dividend-paying streak through several periods of economic hardships.
It means that investing in TD and holding the stock in your account can provide you with virtually guaranteed dividends. The longer you hold the stock, the greater your long-term returns can be. Additionally, you can unlock the power of compounding by reinvesting your dividends to earn greater revenues from the stock.
Suppose that you don’t have to pay back your $14,000 CERB. You will still need to pay taxes on the payments you received, depending on your tax bracket. Creating a portfolio of reliable dividend-paying stocks in your Tax-Free Savings Account (TFSA) can help you generate passive income without any tax obligations.
Toronto-Dominion Bank could be an ideal investment to begin building such a portfolio in your TFSA.
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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.