The Canada Revenue Agency began notifying Canadians of debts to their CRA accounts on May 10, 2022. In February, 2023, it began sending letters to people who had not made an effort to resolve their overpayment.Justin Tang/The Canadian Press
The Canada Revenue Agency announced Thursday that it will begin sending warnings in July that could lead to legal action against people with outstanding COVID-19 benefit overpayments who have been unresponsive or unco-operative so far, yet who have the means to pay.
“The CRA has a progressive collection model to ensure all reasonable efforts to recover COVID-19 benefit debts to avoid placing undue hardship on individuals. When COVID-19 benefit debts remain unpaid, the CRA follows a process of responsible enforcement,” the agency said in a statement.
These benefits were handed out between March 15, 2020, and May 7, 2022. The CRA began notifying Canadians of debts to their CRA accounts on May 10, 2022. In February, 2023, it began sending letters to people who had not made an effort to resolve their overpayment.
The tax collection agency said $9.53-billion in outstanding COVID-19 benefit recovery-related debt remained as of April 30. Of that total, $5.4-billion is from the Canada Emergency Response Benefit (CERB), which was paid out to Canadians who were unable to work or who suffered a loss of income because of the pandemic.
Jeff Kirshen, a partner at SpenceDrake Tax Law, said once a legal warning letter is sent, taxpayers have 14 days to contact the issuer, who is normally a CRA collections officer. Then, ideally, a payment plan can be set up that meets the individual’s needs. However, if individuals who receive warnings do not take steps to resolve their debt, the CRA could take legal action, such as withholding of wages or other income sources.
Mr. Kirshen said he’s surprised to see the CRA take this bold step, and he’s worried that the sheer number of people the agency will deal with on this matter could leave those who are most vulnerable inadvertently at risk of facing punishment.
“People who haven’t responded, it doesn’t necessarily mean that they’re not entitled to the benefit. It could mean that their address is out of service, they don’t speak English, maybe they’re alone, someone who doesn’t have family or friends who are capable of explaining to them what this means,” he said.
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For individuals trying to repay their debt, Mr. Kirshen said he fears the added workload from these legal actions could jeopardize the CRA’s ability to follow up with responses from hundreds of thousands of other affected Canadians.
“What worries me the most is if they start taking action against these people, they will be so busy with taking action against each individual that they won’t have the time to answer the phone to call someone back who actually does want to work out a payment plan,” he said.
Elizabeth Mulholland, chief executive of Prosper Canada, a national anti-poverty charity, said she’s not surprised that the CRA is turning to legal action to deal with unpaid debts, and she’s glad to see emphasis on only reaching out to people who have the financial capacity to pay. However, she said she’s worried that what’s good in theory may get lost during implementation.
“We’ve encouraged the CRA to be more transparent about what constitutes inability to pay so that people could understand whether or not they’re vulnerable to the CRA coming after them, so to speak, or garnishing their accounts,” Ms. Mulholland said.
Reviews of COVID-19 individual benefits, including CERB, Canada Recovery Benefit (CRB), Canada Recovery Caregiving Benefit (CRCB), Canada Recovery Sickness Benefit (CRSB) and Canada Worker Lockdown Benefit (CWLB), began in 2020 and will conclude in 2025, according to the CRA. Outstanding debt amounts include $2.67-billion for CRB, $1.25-billion for the CRCB, $180-million for the CRSB and $20-million for the CWLB. This latest action comes after a series of steps taken by the CRA that began two years ago.
Ms. Mulholland said the range of households that will struggle to repay their debt after claiming full COVID-19 benefits for an extended period of time is likely to widen.
“It’s not just low-income households. A lot of people are feeling the pinch. We’re not in boom times right now,” she said.
