Published: January 20, 2022
Last Updated: January 20, 2022
Introduction – what is the Expanded Canada Worker Lockdown Benefit
As new strains of COVID-19 continue to impact the lives of people in Canada and across the world, new lockdown measures have been implemented by various local governments in Canada. Many Canadians found themselves in situations where they are unable to work due to COVID-19 related lockdowns. The Canadian Federal government instituted a new COVID-19 benefits measure by expanding the Canada Worker Lockdown Benefit.
This benefit will provide $300 a week in income support to eligible workers who are directly affected by a COVID-19-related public health lockdown, and who have lost 50% or more of their income as a result. In this article we will further discuss the mechanism of the expanded Canada Worker Lockdown Benefit as well as some of its tax implications.
Eligible Regions Canada Worker Lockdown Benefit
The expanded Canada Worker Lockdown Benefits are restricted to designated lockdown regions. These regions are listed in the following link [https://www.canada.ca/en/services/benefits/covid19-emergency-benefits/designated-lockdown-regions.html]
Eligible Periods Canada Worker Lockdown Benefit
The payment for the new expanded Canada Worker Lockdown Benefit applies retroactively from December 19, 2021, despite the fact it was announced on December 22, 2021.
Eligibility Criteria Canada Worker Lockdown Benefit
To be eligible for the expanded Canada Worker Lockdown Benefit, you must meet all of the following criteria:
- You earned at least $5,000 in 2020, 2021, or in the 12 months leading up to the day you apply for the benefit;
- You filed a 2020 tax return;
- A region where you work or provide a service is designated as a COVID-19 lockdown region during the application period;
- A designated COVID-19 lockdown in your region resulted in one of the following during the application period:
- you lost your job and are unemployed
- you are self-employed but unable to continue your work
- you are employed or self-employed but had a reduction of at least 50% in your average weekly income as compared to the previous year.
It is important to note that if you were self-employed before the lockdown, this does not disqualify you from the expanded Canada Worker Lockdown Benefit. The eligibility of self-employed workers caused controversy and confusion in 2020 when the government initially took the position that self-employed individuals are not eligible for CERB.
It is important to note that the requirement that you must earned at least $5,000 in 2020, 2021, or in the 12 months leading up to the day you apply for the benefit is more stringent than it appears. This requirement was further broken down as the following:
- employment income (total or gross pay)
- net self-employment income (after deducting expenses)
- maternity and parental benefits from EI or similar QPIP benefits
- EI regular, special, or fishing benefits
- amounts from these COVID-19 benefits:
- Canada Emergency Response Benefit (CERB)
- Canada Recovery Benefit (CRB)
- Canada Recovery Caregiving Benefit (CRCB)
- Canada Recovery Sickness Benefit (CRSB)
The following payments are explicitly excluded as not counting towards the $5,000
- disability benefits
- student loans, bursaries or scholarships
- social assistance or family support payments
- Canada Pension Plan (CPP), Québec Pension Plan (QPP), or other pension income
- Old Age Security (OAS) payments
- Canada Emergency Student Benefit (CESB)
Pro Tax Tips – What to Do if the CRA Denies Your Claims for Canada Worker Lockdown Benefit
As with the CERB, the Canadian government administers the expanded Canada Worker Lockdown Benefit through the CRA. When Canadians apply for their expanded Canada Worker Lockdown Benefit, the CRA might assess their applications and ask questions about their eligibility. If the CRA is not satisfied with the answers, they could reject the applications outright.
When you have received your expanded Canada Worker Lockdown Benefit but are later found out by the CRA to be ineligible, the CRA can assess you in a similar manner as any other tax reassessments. You may appeal to the assessment through CRA’s internal objection process. Alternatively, you may choose to return the amount owing.
CRA has sets out additional policies regarding the timing of the return of funds. If you return the amount before December 31, 2022, the amount will not be reflected in your 2022 income tax assessments. If you return the amount after December 31, 2022, this amount will be reflected in your 2022 income tax assessments. When an amount is owing on your 2022 income tax assessments. Compound Interest can accrue on your late-returned amounts if you failed to pay them on time.
CRA also reserves the option to levy penalties and even conduct criminal prosecution for individuals who make intentionally fraudulent claims. It is important to note that CRA is allowed under law to make initial assumptions of tax fraud or gross negligence when tax assessing penalties on Canadian taxpayers. Speak to our experienced Toronto tax lawyers if the CRA intends to assess or has assessed you for tax fraud regarding the expanded Canada Worker Lockdown Benefit.
"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."
The CRA will withhold 10 percent of your Canada Worker Lockdown Benefit payment for tax purposes and they may refund the amount or ask for additional tax payments depending on your total amount of tax owing at the end of the year.
You can late file your T1 return now and incur late-filing penalties along with interests for tax owing. If you have extenuating circumstances that caused you to unable to file on-time, you may be eligible to use CRA’s taxpayer relief program to request penalty and interest relief.
If you are eligible for the extended Canada Worker Lockdown Benefit, you will receive $300.00 per week from December 19, 2021, up to February 12, 2022.