COVID BENEFITS and REPAYMENT
Beginning in March 2020, when the COVID-19 pandemic led to job losses and reduced work hours due to lockdowns, the Canadian government introduced a series of benefit programs. These ran for about 26 months (March 2020 – May 2022) and provided financial support to affected individuals.
A key dispute arose with self-employed individuals. The CRA initially interpreted the $5,000 income test as net income (after expenses), not gross income. Many applicants had applied using gross income. After public pressure, in February 2021, the CRA clarified that if someone would have qualified based on gross income, they would not have to repay CERB.
Challenging CRA’s decision (for benefits administered by CRA):
If the CRA suspects a person might have received a payment without meeting eligibility criteria, their first step is to send a letter advising they are reviewing the file to verify eligibility. The letter may request information and supporting documents. This is not a decision letter, but rather it is a letter informing the person that the eligibility is being reviewed.
If a person fails to respond to this first letter, the CRA will send an initial review decision and advise that the person has 30 days to request a second review.
If instead the person does respond, the CRA will consider the response, and further communications may occur to address and resolve issues. Some communications may occur over the phone. At some point the CRA will issue an initial review decision letter which will advise that the person has 30 days to request a second review.
If a second review is requested it will be conducted by a different CRA officer and a second review decision will be issued. If the CRA agrees to proceed with a second review, the person may have further opportunity to explain their position and provide further supporting documentation.
If a request for a second review is made late, the CRA has the discretion to conduct the review despite the lateness of the request. The CRA will either advise that it is declining to conduct a second review because 30 days have passed, or else it will conduct a second review and issue a second review decision.
If (and only if) a second review was requested, the person will be informed of their right to challenge the CRA’s decision by bringing a court application to Federal Court for judicial review. The letter will advise that a person has 30 days to bring the application from the date of the letter.
If the 30 day deadline passes a judicial review application cannot be brought unless the court first decides, on a motion, to grant an extension of the 30 day deadline. Therefore a motion has to be made first, and only if successful can a judicial review application be made. To succeed on a motion the person must demonstrate a reasonable explanation for the delay, and show that an application for judicial review will have at least some merit.[1]
The role of the judge on a judicial review application is to determine if the CRA’s decision was reasonable and the process was fair. If unreasonable or unfair, the judge will direct the CRA to reassess the matter and issue a new decision. The CRA will have to take into account the judge’s reasons for determining that the decision was unreasonable or unfair. In rare cases, where it is very clear what the outcome should be, instead of ordering a re-assessment a judge can order that the CRA’s decision be reversed.
Many people have brought judicial review applications, but most have been unsuccessful. Many have been self-represented. Although legal representation is advisable, it is not a requirement and may not make sense since legal fees may result in a small net recovery, or an even greater loss if the judicial review application is unsuccessful. One option is to consult a community legal clinic.
Some people have reported success with contacting their local MP.
The government cannot charge interest on Covid debt for erroneous payments.[2]
The CRA can, at its discretion, apply tax refunds and benefits to reduce Covid debt.
CERB: The CRA or Service Canada can certify a CERB debt and register the certificate with the Federal Court. A registered certificate has the same effect as a judgment of the Federal Court. Therefore registration permits the government to enforce a debt using measures such as garnishment and seizure of assets.[3]
CRB: The CRA can garnish bank accounts or employers by serving a notice, without first getting a court order.[4]
Will the CRA apply Canada Groceries and Essentials Benefits (formerly GST/HST credit) and Trillium benefits to Covid debt?
Should a client enquire, the best answer is “maybe”. It appears the CRA is applying a financial hardship test. If a person’s income is below a threshold, the CRA may pay the benefits rather than use them to set off Covid debt. The CRA does not publicly state their policies on this subject.
If you owe money, you can contact the CRA or Service Canada to:
Who to call:
Option 1: Request a Repayment Plan:
If you have some ability to pay back your overpayment, call the CRA to request a repayment plan that works for you. For example, if you can only afford to pay $20 per month, ask the CRA if they will agree to that plan. The CRA does not have to agree to the repayment amount that you propose.
Be prepared to explain your financial situation. This could include your monthly income and expenses, the number of people who depend on you financially, and any personal circumstances that affect your ability to repay the debt, such as a health condition, food bank use, or disability.
In some cases, the CRA may send you a form to complete. They may also ask you to provide documents about your sources of income, any assets you own, monthly accommodation costs, and annual extraordinary expenditures (such as medical and dental costs, food bank use, etc.).
Be sure to ask the CRA not to use any tax refunds, tax credits, or benefit payments you are entitled to receive (such as the Canada Groceries and Essentials Benefit) to repay your pandemic benefit debt.
The CRA usually confirms repayment plans by phone rather than in writing. It is a good idea to keep a record of the date of your call and the details of the agreement.
Option 2: Request a Pause on Debt Collection:
If you cannot afford to pay back any of the overpayment debt without foregoing your basic needs, ask the CRA to put a pause on collecting your debt.
When you ask for a pause, explain your financial situation and why you cannot afford to make payments. In some cases, this may be enough. In other cases, the CRA may ask you to provide information or documents about your income, assets, housing costs, and other major expenses, such as medical or dental costs, existing debts, or food bank use.
If the CRA agrees to your request, then they will not ask you to make payments toward the debt for a specific period of time (for example, the next 6 months). This is usually temporary. When the pause is coming to an end, you may need to contact the CRA again to ask for another pause if you are still experiencing financial difficulties or hardship. Be aware that if your financial situation improves, the CRA may ask you to begin making payments toward your debt.
Be sure to ask the CRA not to use any tax refunds, tax credits, or benefit payments you are entitled to receive (such as the Canada Groceries and Essentials Benefit) to repay your pandemic benefit debt.
The CRA usually confirms repayment plans by phone rather than in writing. It is a good idea to keep a record of the date of your call and the details of the agreement.
What information to have ready:
You should have the following information or documents ready before you call:
References:
[1] An example court decision (among many) on a motion to extend the 30 day time limit: Tanczos v. Canada (2024 Federal Court)
[2] CERB Act, s.14; CRB Act, s.34(2).
[3] CERB Act, s.12
[4] CRB Act, s.29