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Legal action coming to recover COVID benefit overpayments: CRA

The Canada Revenue Agency is ramping up efforts to recover overpayments of pandemic-related benefits to individuals as more than $9 billion remains owed.
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The Canada Revenue Agency says it is ramping up efforts to claw back overpayments of pandemic-related benefits. The Canada Revenue Agency sign outside the National Headquarters at the Connaught Building in Ottawa is seen on Monday, March 1, 2021. THE CANADIAN PRESS/Justin Tang

The Canada Revenue Agency is ramping up efforts to recover overpayments of pandemic-related benefits to individuals as more than $9 billion remains owed.

The agency said Thursday that starting in July, it will begin using legal warnings and means to recover overpayments, actions that could include taking payments out of wages or bank accounts.

The agency said it will only be taking legal action against those who have not responded or co-operated and who have been determined to have the financial capacity to pay.

"Our primary goal is to encourage individuals to contact us so we can work together to find the best way to resolve their debt, ensuring a fair and manageable process for everyone," spokeswoman Sylvie Branch said in an email.

The agency said it remains committed to supporting 91原创s who are not able to repay their debt and encouraged those individuals to contact them to figure out a plan.

The rollout of pandemic relief payments saw more than $200 billion doled out to individuals and businesses on a pay-now-ask-questions-later basis.

The CRA said it's still trying to get about $9.53 billion paid back from individuals who were ineligible including $5.41 billion from the Canada Emergency Response Benefit, $2.67 billion from the Canada Recovery Benefit and $1.25 billion from the Canada Recovery Caregiving Benefit.

The agency began efforts in May 2022 to recover payments deemed ineligible by sending out letters encouraging voluntary payments.

Last year, it sent out collection letters and made efforts to reach people by phone. It also started using a process it calls "offsetting," which means that it automatically uses money from tax refunds and some benefits to settle a person's debt with the government.

Those who are told they owe can ask for two reviews of the conclusion, where they're given the opportunity to try and prove they qualified, said Dale Barrett, founder and managing lawyer of Barrett Tax Law.

But he said given the information the CRA has, there's usually not much room for debate on whether someone qualified for the benefits.

"Most of the issues are pretty clear cut."

Those who still want to challenge the decision after two reviews can take their case to Federal Court, but it generally requires a lawyer and is an expensive prospect for the amount of benefits involved.

"They still have the opportunity to go to court, which unfortunately is one of those things that's very expensive to do," Barrett said.

There have been more than 1,000 people who have challenged the findings in Federal Court and some people have been successful, against the odds, in securing another review after self-representation.

Those included an Ontario hospitality worker who demonstrated his joblessness was related to the pandemic by showing he went through three interviews for an airport position just before COVID-19's onset.

A Quebec retiree, meanwhile, convinced a judge he had been doing odd jobs as a landscaper to make extra cash after the level of his pre-pandemic income was challenged by the CRA.

But far more have been forced to pay back the funds owed.

"Just in the majority of the cases, the CRA knows, they know whether you've qualified or not. They've got your tax return," said Barrett.

He said that while as a tax lawyer he's always happy to prove the agency incorrect, he thinks they've done a reasonable job navigating the return of benefits.

"It's always lousy getting a collection call from the CRA. But at the end of the day, it's also lousy having taxpayer dollars go to places where they shouldn't be going."

There is the small consolation for those who owe — there are no penalties or interest on the emergency benefits overpayment debts.

— With files from Darryl Greer in 91原创

This report by The 91原创 Press was first published June 27, 2024.

Ian Bickis, The 91原创 Press