The COVID-19 pandemic led to leaders across Canada taking radical action to contain the spread. This included new restrictions and lockdowns that led to mass job loss. In response to this economic devastation, the federal government introduced ambitious social programs to bail out the populace. Indeed, the Canada Emergency Response Benefit (CERB) was administered by the Canada Revenue Agency and provided immediate relief to struggling Canadians.
In the spring, I’d warned Canadians to be very cautious through the application process. Early on, the federal government warned that CERB recipients in breach of eligibility could face stiff penalties. This week, reports showed that the Canada Revenue Agency sent 441,000 “education letters” to Canadians who may be forced to repay CERB benefits. These letters were sent to recipients who were “unable to confirm” had the employment or self-employment criteria required. Moreover, we should expect more of these letters to be sent for other breaches in the months ahead.
Canada Revenue Agency: Will CERB recipients receive leeway?
When the CERB was launched, it was a chaotic time for many Canadians. This has inspired some media outlets to inquire whether the Canada Revenue Agency will show leeway with CERB recipients who may have been in breach of eligibility.
Employment Minister Carla Qualtrough expressed sympathy for those who neglected to meet the criteria. However, there has not been a conversation over mass forgiveness to those who made this error. The employment minister conceded that communication should have been clearer early on through the Canada Revenue Agency website. Further, some have argued that the government was not clear in how it defined “income.”
It is unclear when the debt-collection process will begin. Million of Canadians are already facing severe financial trouble in the face of this pandemic. Moreover, the Canada Revenue Agency has said that it will resume collection activities “when it is responsible to do so.” This is an encouraging attitude as a campaign of collection could make strenuous demands on many Canadians who are already stressed and struggling in this crisis.
A CERB alternative that all Canadians should explore
In the summer, I’d suggested again and again that CERB recipients should look for long-term alternatives. The federal government offers registered programs like the Tax-Free Savings Account (TFSA). Best of all, all income and capital gains generated in the TFSA are yours to keep. You do not have to pay a dime to the Canada Revenue Agency.
For those just starting out, you may want to take a conservative route. One of my favourite dividend stocks to stash in a TFSA right now is Genworth MI Canada (TSX:MIC). Genworth is the largest private residential mortgage insurer in Canada. Its shares have climbed 21% over the past three months as of close on December 16. The stock is still down 11% in 2020.
Shares of Genworth last possessed a very attractive price-to-earnings ratio of nine and a price-to-book value of one. Moreover, Genworth offers a quarterly dividend of $0.54 per share. That represents a solid 4.9% yield. Canadians should look to stash Genworth in their TFSA and duck any capital gains payments to the Canada Revenue Agency.
