Another taxpayer loses his case for CERB payments in court

Posted on by Duane Roberts

Taxes Personal Finances

Jamie Golombek: Taxpayers must demonstrate that the CRA’s decision is unreasonable

Publication date:

03 Mar. 2022 • 3 days ago • 5 minutes read • 33 Comments The landing page for the Canada Emergency Response Benefit. The landing page for the Canada Emergency Response Benefit. Photo by THE CANADEAN PRESS/Giordano Ciampini files

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We’re starting to see a stream of cases go to court with taxpayers fighting for their right to the Canada Emergency Response Benefit (CERB) they claimed in 2020.

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The CERB was the first pandemic support generally available to individuals and lasted until fall 2020 when it was replaced by the Canada Recovery Benefit (CRB). Eligible individuals can receive $500 per week, for up to 28 weeks, provided they earned at least $5,000 in net income in the prior year and earned less than $1,000 in the period in which they claimed the CERB.

Last month I shared a story about a man from Cambridge, Ont., who in court challenged the Canada Revenue Agency’s decision that he was ineligible for the CRB in 2020 because he did not have $5,000 in income the previous year. earned. Now another case has gone to federal court, this time over the eligibility of CERB.

The taxpayer was in court to request a judicial review of a December 2020 CRA decision rejecting his application to the CERB. The taxpayer had applied for and received the benefit for the four four-week periods between March 15 and July 4, 2020. He relied on billed tuition income totaling $5,250 he would have received in January and February 2020 as a basis for his application. †

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In July 2020, the taxpayer learned that a “hold” had been placed on his account that prevented him from requesting a fifth CERB payment for the period from July 5 to August 1, 2020. After several phone calls with the CRA, Canada Emergency Benefit Validation- agent informed him that the CRA would need proof of tuition fees to continue collecting the CERB.

To support the income requirement, the taxpayer filed a series of invoices addressed to customers, each stamped “PAID”. In response to a request from the CRA for additional proof of income in the form of bank statements, the taxpayer stated that his customers paid him in cash and that he had not deposited the money in the bank.

In November 2020, the taxpayer received a letter from the CRA stating that he was ineligible for the CERB because he did not meet the $5,000 income requirement. The following month, the taxpayer requested a review of the CRA’s decision, arguing that the CERB Act and the information on the Canada.ca website regarding the validation of CERB applications was “ambiguous.” He believed that the invoices he submitted to the CRA as proof of his income were sufficient supporting evidence and that he was not required to deposit his income into a bank account as proof that he had actually been paid.

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The taxpayer requested a second assessment, which was done by another CRA official, who also concluded that he had not met the CERB’s eligibility criteria and rejected his application. In January 2021, the taxpayer submitted a request for judicial review of the CRA’s second review decision.

The case went to Federal Court last fall, where the judge was to decide whether the CRA’s decision to dismiss its CERB claim was “reasonable.” To do this, the court examines the reasons given by the CRA and determines whether the decision “is based on an internally coherent and rational chain of analysis” and “justified in relation to the facts and legislation limiting the decision-maker”. However, it is up to the taxpayer to demonstrate that the CRA’s decision was unreasonable.

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The CRA official’s statement noted that for several reasons, the bills filed by the taxpayer were not sufficient to prove that he had earned at least $5,000 in the previous 12 months. First, the taxable person was unable to provide any documents proving that the invoices had been paid. Second, the CRA officer was unable to match the names and addresses of the alleged clients teaching on the invoices to those on the CRA’s computer system. Since the bills themselves did not contain full names or addresses (the unit numbers were missing, for example), the officer conducted further searches to match the names and addresses, but those searches were also unsuccessful. Finally, the CRA official noted that in the previous 2019 tax year, the taxpayer only reported social assistance benefits on his personal tax return.

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The taxpayer has been advised several times to submit additional documents to support his CERB application. During a phone call, he informed the CRA that he had additional information but was “unwilling to share it.”

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CERB recipients who cannot verify their eligibility for the benefit must repay it.

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The judge reviewed the evidence and concluded in a decision released in February that it could find no significant error or oversight in the CRA’s second review decision that justified the court’s intervention.

“The CRA’s refusal to accept the invoices without further proof of payment is justified in light of the (taxpayer’s) interactions with the CRA… “In the present case, the circumstances surrounding the alleged apprenticeship income of the ( taxpayer) to the CRA and it was not unreasonable for the (CRA) to request additional documents.”

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The judge dismissed the case, concluding that the reasons advanced by the CRA for denying the taxpayer’s CERB application were “understandable and justified in light of the evidence.”

The taxpayer also tried to argue that the $5,000 income requirement to collect the CERB was a violation of the Charter of Rights and Freedoms in that the amount was an arbitrary threshold that discriminates against the poor and those with low net incomes.

However, the judge declined to comment on the merits of the taxpayer’s constitutional arguments, as he had not provided factual evidence to substantiate his claim of discrimination. As previous case law has concluded, “Charter decisions cannot be based on the unsupported hypotheses of enthusiastic counsel” when it comes to a constitutional challenge.

Jamie Golombek, CPA, CA, CFP, CLU, TEP is the General Manager, Tax & Estate Planning at CIBC Private Wealth in Toronto. Jamie.Golombek@cibc.com

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This post Another taxpayer loses his case for CERB payments in court

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