CRA sends letters about CERB to taxpayers: what you need to know

Posted on by Duane Roberts

Taxes Personal Finances

Jamie Golombek: CRA sends letters that are sure to cause a wave of tax objections and in some cases lead to lawsuits

Publication date:

February 3, 2022 • February 4, 2022 • 4 minute reading • 18 Responses CERB recipients who cannot verify their eligibility for the benefit must repay it. CERB recipients who cannot verify their eligibility for the benefit must repay it. Photo by Peter J. Thompson/National Post

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The Canada Revenue Agency last week began sending letters to several taxpayers who received the Canada Emergency Response Benefit (CERB) in 2020, requesting additional information to substantiate their entitlement to the pandemic benefit.

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You may recall that the CERB was the first pandemic support generally available to individuals, and it lasted until October 2020 when it was replaced by the Canada Recovery Benefit (CRB). Eligible individuals could receive $500 per week, up to a maximum of 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.

The letters are specifically aimed at people for whom the CRA believes they have earned Lake than $1,000 during the periods when they claimed CERB. The CRA pointed out that individuals who received this letter have not been automatically marked as inadmissible, but that it “simply does not have the necessary information” to confirm their entitlement.

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The CRA asks these individuals to submit proof of their earnings during the CERB periods. The documents requested include copies of bank statements showing their income, pay slips for the relevant time periods, a letter from their employer confirming their income and when it is earned, and an amended T4 slip for 2020 showing income broken down by CERB period of time.

CERB recipients who cannot verify their eligibility for the benefit must repay it. But, in the words of the CRA, if they’ve applied “in good faith,” they won’t be charged with penalties or interest.

These letters are sure to spark a wave of tax objections and, in some cases, lead to lawsuits, with taxpayers who didn’t fully understand the rules turning against the agency to try to keep their pandemic-related benefits. An example of the types of tax disputes that we will soon see with some regularity can be found in a recent motion in federal court.

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A Cambridge, Ont., taxpayer has applied for an extension of time to file for a judicial review of the CRA’s April 30, 2021 decision that found that he was ineligible for the CRB in 2020 because he didn’t make $5,000 in income the previous year.

The CRA offers a two-tier administrative review process for requests. If you submit a request for review, the CRA will conduct an initial review and communicate its decision in writing. If, upon receipt of this decision, you believe that the CRA has not properly exercised its discretion in considering the initial request for review, you may request a second review in writing.

The Canada Revenue Agency headquarters in Ottawa. The Canada Revenue Agency headquarters in Ottawa. Photo by Errol McGihon/Postmedia

With this second request, you must list the reasons why you do not agree with the decision of the CRA. For example, not all information was considered, or perhaps certain facts or details were missing, misinterpreted or not considered in their proper context. You also submit relevant new documents, facts and correspondence.

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Here, upon receipt of the decision from the CRA, the taxpayer amended his 2019 tax return with the help of a local tax consultancy. His revised 2019 tax return showed gross self-employment income of $6,850 and net income of $5,390. He filed this amended return in June 2021, requesting a reassessment of his eligibility for the CRB.

In August 2021, the CRA told him by phone that it was refusing to reassess his eligibility, referring to the April 2021 assessment as a “second-level assessment”. The taxpayer would have to go to court and seek judicial review to determine whether the CRA’s decision was reasonable.

The problem, however, was that by then taxpayers had missed the 30-day deadline to request a judicial review of the April 30 CRA’s decision. Fortunately, the court has the freedom to extend this term. In assessing whether the granting of a deferment is “in the interests of justice”, the most important factors are whether the taxpayer has demonstrated a reasonable explanation for the delay, that it intends to proceed with its application, and that the application itself has some merit. has.

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The taxpayer based its request for extension on its amended 2019 tax return, which stated net self-employment income of $5,390, as well as “significant personal medical issues.” In this case, “The real question is whether the application can be justified,” the judge wrote.

The judge agreed and concluded that the CRA had not yet made its second-line assessment. The taxpayer’s initial request was denied, and that was the first assessment. The taxpayer then took steps to review his taxes to submit to the CRA. The revised tax information, as well as further information on taxpayer health issues, are “relevant new documents and facts” to be considered in a second review. “It does not appear that the (taxpayer) has received this second-line assessment,” the judge concluded.

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Accordingly, on January 5, 2022, the judge granted the taxpayer a deferment to file his request for judicial review, which he subsequently did on January 18. Whether the court will ultimately order the CRA to reconsider the taxpayer’s case is subject to a decision in a full trial in the coming months. Stay tuned …

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 CRA sends letters about CERB to taxpayers: what you need to know

was original published at “https://financialpost.com/personal-finance/taxes/what-you-can-do-when-the-cra-starts-asking-questions-about-your-cerb-relief”

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