Canadians with pandemic benefit debt to get one year of interest relief from Ottawa, says source

Canadians who received pandemic benefits will have up to a year to pay back any debt from those benefits without interest, CBC News has confirmed.

The interest relief will apply to Canadians who made up to $75,000 in taxable incomein 2020 and received one of the federal government's five pandemic relief benefits or employment insurance benefits. The measure wasfirst reported by The National Post.

Those pandemic benefits arethe Canada Canada Emergency Response Benefit (CERB), the Canada Recovery Benefit (CRB) that replaced it, the Canada Emergency Student Benefit (CESB), the Canada Recovery Caregiving Benefit (CRCB) and the Canada Recovery Sickness Benefit (CRSB).

The interest relief will be appliedautomatically to anyone who meets the criteria, according to a government source not authorized to speak publicly.

The measure means benefit recipients won't be required to pay any interest or outstanding income tax debt until April 30, 2022, according to the source.

The formal announcement is expected Tuesday.

No debtclawbacks on benefits

Those who are eligible for the interest relief will also get one more break. The Canada Revenue Agency is expected to announce it won't claw back monthly or quarterly benefits, such as the Canada Child Benefit or the GST/HST tax credit, to pay down outstanding debts.

The CRA already hadsuspended collectionactivities onnew debt during the pandemic, saying it would return to collecting debts "when it is responsible to do so."Federal officials have refused to speculate about when that time might come.

The interestrelief announcement comes as the federal government gears up for what officials have called "a tax filing season like no other."

In a December interview with CBC News, Employment Minister Carla Qualtrough said that "tax time is going to be tough."

She said that while thepandemicbenefits are taxable because they are an income replacement she acknowledged that"people most likely haven't put aside that portion of every $2,000 they got for CERB for taxes."

Officials tried to address that issue when CERB was replaced with a suite of benefits in September: the CRB, CRCB and CRSB.

With those benefits, the CRA withheld 10 per cent at the source to go towardtaxes.

The agency still warns on its website that Canadians mayhave to pay more in tax on the benefits, depending on how much they earned in 2020.