CRA asks for repayments by Dec. 31 as affected individuals decry unfair wording in application forms
The federal government’s rush to give out emergency aid in the early months of the pandemic led to widespread benefits confusion in early June, when some recipients found they’d prematurely maxed out the benefits they were expecting to receive until July. That echoed in late October, when the Canada Revenue Agency (CRA) sent out letters asking Canadians who inadvertently got double payments of the Canada Emergency Response Benefit (CERB) to give back their excess benefits.
And now, a new wave of clarifications, this time for a segment of self-employed Canadians whom the CRA is asking to return all their CERB payments by New Year’s Eve.
As reported by CTV News, rules explained in CERB application forms said that self-employed Canadians were qualified for CERB as long as they had earned income of more than $5,000 in 2019 or within the 12 months before they applied.
But in letters the CRA sent requesting repayments, it said the threshold applied to “net” self-employment income. The three-letter word was reportedly not included in the application forms, nor does it appear in the “who is eligible” page for CERB on the official Government of Canada website.
“They changed the rules without telling anyone anything,” Garth Loga, a self-employed contractor from B.C., told CTV News. In 2019, his reported gross income exceeded $10,000, but netted out to $2,000 after expenses. Forced to shut down his 33-year-old business, he’s reportedly resorted to selling his truck and tools to meet his unanticipated $14,000 obligation to the CRA.
Loga wasn’t the only one caught wrong-footed. Phil Cox, the owner of a theatrical supply company in Ontario, said he and his wife had brought in more than $5,000 in gross income last year. But after considering a $12,000 write-off due to theft committed by an employee, their net income for 2019 came in at just under $5,000.
“It’s frustrating because we felt we could keep our heads above water,” said Cox, who had decided to dip into his savings and keep the business running on the mistaken premise that he qualified for CERB.
The absence of the word “net” in applications could be a polarizing concern for tax professionals as well. Wilmont, Ontario-based accountant David Murray took issue with the lack of clarity and the problems it’s causing his clients. In a conversation he reported having with a CRA agent, he was told that the word “net” was implied.
“You can imply anything you want, but if you don’t have it in writing, it’s not valid,” Murray told the news outlet.
Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth Management, acknowledged communications from the government might not have been as clear as they should have been, but said he understood “from day one” that the CRA’s self-employed income test was referring to net income.
“If the goal was $5,000 income, it's not $5,000 of revenue,” he told CTV News. A Q&A page on the CRA website, Golombek pointed out, advises business owners to consider their “net pre-tax income (gross income less expenses)” in determining their eligibility for CERB.
In a statement to CTV News, a spokesperson for the CRA said that it has always defined self-employment income as net pre-tax income, and had not changed its position during the lifecycle of the CERB program. While the agency said it is being “sympathetic” by giving Canadians time and flexibility to repay CERB, it maintained that the letters it sent out were not a mistake.
“CERB recipients who do not meet this eligibility criteria will need to repay CERB payments received,” it said.