Comparative reports pertaining to the federal COVID-19 benefits repayment
Q: Where taxpayers who received federal COVID-19 benefits in 2020 repaid them in 2021, they can choose in which tax year they want to claim the deduction for the repaid amount. They can also choose to split the deduction between the 2020 and 2021 returns, as long as the total deduction does not exceed the amount refunded. Could the software include an optimization feature to help taxpayers determine how to split the deduction between the years 2020 and 2021 to achieve an optimal result for both years?
A: Starting with version 25.12, when the taxpayer has repaid federal COVID-19 benefits in 2021, the program will generate the Comparative report T1 - 2021 and 2020 pertaining to the federal COVID-19 benefits repayment (as well as the Comparative report TP1 - 2021 and 2020 pertaining to the federal COVID-19 benefits repayment for residents of Quebec).
Since a deduction claimed on the return lowers the taxpayer's net income for the year and may affect other deductions and/or credits, these two reports allow you to view the effects of whether or not to claim the deduction in 2021. Note that the taxpayer's situation in 2020 is displayed for comparison purposes only. The effects of whether or not to claim the deduction in 2020 are not presented in this report.
Procedure for allocating the deduction between the years 2020 and 2021
If your client has repaid in 2021 federal COVID-19 benefits (CERB, CRB, CRCB, CRSB or CESB) that they received in 2020, this amount will be indicated in box 201 of the T4A slip. If they received the CERB from Service Canada, the amount repaid will be included in box 30 of the T4E slip with the other amounts of employment insurance repaid (a letter confirming the amount of CERB repaid will be sent by Service Canada).
Note that these slips (T4A and/or T4E) will be issued for the year 2021 only. However, you must enter them in the years 2020 and/or 2021 depending on the allocation chosen.
To claim the deduction on the 2020 return:
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Enter the portion of the repayment that your client wishes to deduct in box 201 of the T4A slip (including the portion of CERB repaid to Service Canada).
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This amount will be reported on line 23200 of the federal return, and on line 246 of the Quebec return for residents of this province, if applicable.
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If the 2020 return has already been filed, you can request an adjustment to this return by using the ReFILE service, by sending the T1-ADJ form in paper format, or by submitting the request directly online through the Change my return service in My Account.
To claim the deduction on the 2021 return:
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If the amount repaid is indicated on the T4A slip, enter the portion of the repayment that they wish to deduct in box 201 of the T4A slip.
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If the amount repaid is indicated on the T4E slip, enter the portion of the repayment that they wish to deduct in the keyword CERB-REPAID associated with box 30 of the T4E. Don't forget that box 30 of the T4E also includes other amounts of employment insurance repaid. Therefore, if your client is claiming a portion of the CERB refund on their 2020 return, you must subtract this portion from box 30 of the 2021 T4E slip and enter only the difference in the keyword EIB-Repaid associated with this box.
To learn more, visit the Tax Treatment of COVID-19 Benefit Amounts page which provides helpful additional information in the form of questions and answers related to the above changes, including some examples.
