CRA threatens legal action against ineligible COVID benefit recipients

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OTTAWA — The Canada Revenue Agency is ramping up the pressure and threatening legal action on unco-operative ineligible COVID-19 benefit recipients as the tax authority looks to recoup nearly $10 billion in lingering overpayments.

As COVID-19 emergency benefits like CERB and its successor the Canada Recovery Benefit (CRB) came to an end by 2022, the Canada Revenue Agency and its partners knew they faced the monumental task of recouping billions of dollars in overpayments.

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First, the CRA sent a letter to likely ineligible COVID-19 benefit recipients in May 2022 asking them to voluntarily repay the sums.

Then, the CRA sent a second letter the next year to individuals who still hadn’t reimbursed their benefit overpayments from programs like CERB or CRB, threatening to begin the collection process. It also tried to reach them by phone.

Starting next week — two years after its first letter — the agency now says it will be sending a third letter to unco-operative ineligible COVID-19 benefit recipients, this time threatening legal action.

“Starting in July 2024, for individuals who have not responded or co-operated, and who have been determined to have the financial capacity to pay, legal warnings will be issued and legal measures could be taken to recover monies owed,” the CRA said in a release Friday.

“Legal measures are only taken when there is no cooperation from an individual with the ability to repay the debt.”

In a statement, CRA spokesperson Sylvie Branch cited garnishment of wages or a bank account as an example of legal action the agency could take. The CRA will also often apply various tax credits or benefit payments to an outstanding debt instead of paying it to a taxpayer.

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The statement does not detail how many taxpayers will receive the legal warning letters in the coming months.

Data provided by Branch shows that the agency still has a long way to go before it recoups all the money it believes was paid to ineligible COVID-19 benefit recipients.

But it’s also facing an increasingly tight deadline because the law limits eligibility verification to 36 months after a payment.

As of April 30, the CRA said it is looking to recover a total of $9.53 billion in likely COVID-19 benefit overpayments to individuals, including:

• $5.41 billion for the Canada Emergency Response Benefit (CERB)
• $2.67 billion in Canada Recovery Benefit (CRB)
• $1.25 billion in Canada Recovery Caregiving Benefit (CRCB)
• A combined $200 million for the Canada Recovery Sickness Benefit and the Canada Worker Lockdown Benefit.

The amount does not include overpayments for the Canada Emergency Wage Subsidy (CEWS), which doled out just over $100 billion over the pandemic.

In late December 2022, Auditor General Karen Hogan released a report finding that CRA and Employment and Social Development Canada (ESDC) needed to investigate a “minimum” of $27.4 billion in suspicious COVID-19 benefit payments.

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That’s because CRA and ESDC “did not manage the selected COVID‑19 programs efficiently given the significant amount paid to ineligible recipients, the limited adjustments as programs were extended, and the slow progress on post‑payment verifications,” the report concluded.

A large portion of the $27 billion in suspicious payments were tied to the wage subsidy, which the CRA hotly contested. The agency argued at the time that the auditor general’s calculations likely largely overstated potentially ineligible CEWS recipients.

Branch said in her statement that the total amount owed by ineligible COVID-19 benefit recipients will continue to fluctuate as the agency continues its verification work until 2025, three years after all the benefits wrapped up.

She also said that taxpayers struggling to pay back any amounts shouldn’t ignore the agency but instead get in touch to work things out.

“Canadians expect the CRA to ensure benefits are only paid to those who are entitled, and to do so in a manner which recognizes individuals and families who are experiencing significant financial hardship,” she said.

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“To this end, we have adopted a flexible collection approach to encourage voluntary payments. To accommodate the unique challenges brought about by COVID-19, we have broadened the scope of our repayment options, allowing for extended timelines.”

National Post

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