Jamie Golombek: A Federal Courtroom choose discovered the CRA failed to think about taxpayer’s letter of clarification
Critiques and suggestions are unbiased and merchandise are independently chosen. Postmedia might earn an affiliate fee from purchases made via hyperlinks on this web page.
Article content material
Some Canadians who acquired COVID-19 advantages in 2020 and 2021 continue to face an uphill battle in proving they correctly certified for them, particularly if their pre-pandemic earnings will not be verifiable.
Commercial 2
Article content material
Take the case of a British Columbia resident who went to courtroom in September in an effort to keep away from repaying the Canada Recovery Benefit (CRB) funds she acquired throughout her unemployment.
Article content material
The CRB was launched by the federal government in 2020 to offer earnings help to employed and self-employed Canadians who have been affected by the COVID-19 pandemic and weren’t entitled to common Employment Insurance coverage advantages. It was the successor to the Canada Emergency Response Profit program, and was out there from Sept. 27, 2020, via Oct. 23, 2021.
To qualify for the CRB, a taxpayer will need to have had a minimum of $5,000 (earlier than taxes) of employment or web self-employment earnings in 2019, 2020 or within the 12 months earlier than the date of CRB software.
Commercial 3
Article content material
The taxpayer on this case earned $4,052 whereas employed by Dollarama Inc. from June 2019 till September 2019, when she stopped working to attend school in Vancouver. For the primary two months of 2020, the taxpayer claimed she was self-employed, working as a “help employee/cleansing,” however she stopped working in March due to the pandemic.
She utilized for the CRB in April 2020 and acquired funds from Sept. 27, 2020, via Feb. 27, 2021, at which level the funds ceased. In April 2021, she contacted the Canada Revenue Agency to search out out why she had stopped receiving funds. The CRA consultant mentioned the company didn’t suppose she met the earnings eligibility requirement of getting earned a minimum of $5,000 and requested her to ship proof of her earnings to the CRA.
Commercial 4
Article content material
The taxpayer despatched in copies of invoices or receipts for her cleansing companies, however this was inadequate for the CRA, which requested she ship “extra paperwork to show her earnings within the related interval.”
In a July 2021 phone dialog, the taxpayer defined to a CRA agent that she was paid in money for her cleansing companies, and he or she used this money for private bills reasonably than depositing the cash. Thus, there have been no financial institution statements exhibiting such deposits.
The CRA rejected this clarification, issuing a “first evaluation letter” that acknowledged the taxpayer was ineligible for the CRB as a result of she didn’t earn the requisite $5,000 of (self-)employment earnings within the prior intervals. She was advised she might request a second-level evaluation if she didn’t agree, and was additionally advised she can be required to repay the CRB funds she had beforehand acquired.
Commercial 5
Article content material
In September 2021, the taxpayer wrote to the CRA arguing that the wording used on the company’s web site indicated an applicant for the CRB will need to have earned $5,000 “from a number of of the next sources,” and he or she did earn $5,000 from the mix of her Dollarama employment earnings and her self-employment cleansing earnings.
In February 2022, a unique CRA officer confirmed the denial of the taxpayer’s CRB eligibility, sustaining she didn’t earn a minimum of $5,000 of earnings in the course of the related interval. She was once more advised to repay the CRB funds she had acquired. The taxpayer selected to enchantment this resolution to Federal Courtroom.
As in prior such cases, the courtroom’s function is to not substitute its resolution for that of the CRA officer, however reasonably to find out whether or not the CRA’s resolution was “affordable” contemplating the info and proof. An affordable resolution is “one primarily based on an internally coherent and rational chain of study that’s justified, clear and intelligible in relation to the relevant factual and authorized constraints.”
Commercial 6
Article content material
In reviewing the CRA’s second-level resolution, it grew to become obvious to the choose that the taxpayer’s September 2021 letter was “inexplicably” not thought-about. The CRA replied that the taxpayer’s letter was not earlier than the officer as a result of it pertained to the primary evaluation and the primary reviewer had already rendered a call.
The choose known as the CRA’s response “nonsensical.” That letter begins with the next sentence: “I’m interesting your resolution to disclaim me the Canada Restoration Advantages primarily based in your conclusion that I didn’t earn $5,000 within the 12 months previous my software.” The choose concluded this letter was “clear on its face that it was submitted in reference to the (taxpayer’s) request for … (a) second evaluation.” The taxpayer’s letter ought to have been thought-about as a part of the second degree evaluation and since it wasn’t, the choose felt the CRA’s resolution was “procedurally unfair.”
Commercial 7
Article content material
-
Want to take on the CRA? Jamie Golombek shares his own fight with the taxman
-
How to qualify for the federal government’s inflation relief benefit programs
-
Restaurant finds itself in hot water with CRA over servers’ electronic tips
-
CRA has no business telling people how to run their business, judge says in corporate tax case
However the choose went even additional to say the CRA’s resolution was additionally unreasonable. The primary CRA reviewer’s notes indicated the taxpayer was ineligible as a result of she didn’t present enough proof of her self-employment earnings. The primary reviewer famous the taxpayer couldn’t present paperwork aside from the receipts she had already supplied.
However the officer who carried out the CRA’s second-level evaluation didn’t present any notes to clarify the rationale behind their resolution, aside from merely coming to the similar conclusion acknowledged within the CRA’s first evaluation letter that the taxpayer didn’t earn a minimum of $5,000 of earnings. No clarification nor purpose was given.
Commercial 8
Article content material
This lack of reasonableness and transparency, mixed with the CRA failing to think about the taxpayer’s September 2021 letter, led the choose to order that the matter be referred again to the CRA to be reconsidered by a unique agent.
In so doing, nonetheless, the choose steered the taxpayer (and the CRA) refer to a different just lately determined federal courtroom resolution that went via examples of acceptable proof of self-employment earnings. Many of those are taken from CRA’s personal pointers, and, past financial institution statements, might embrace: invoices for companies rendered, documentation for receipt of cost, contracts, an inventory of bills, proof of promoting and every other documentation that can substantiate $5,000 in self-employment earnings.
Jamie Golombek, CPA, CA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Personal Wealth in Toronto. [email protected]
_____________________________________________________________
Should you appreciated this story, sign up for more within the FP Investor e-newsletter.
_____________________________________________________________
