CRA holding back tax refunds from people it says received pandemic benefits by mistake

The 2023 tax season may be over, but some taxpayers are still being hit with unpleasant surprises.

The government has started holding back all or part of tax refunds for Canadians it says received Canada Emergency Response Benefit (CERB) payments for which they weren't eligible.

Ottawa's Jared Cornelius — who saw his entire refund taken this year — insists he was eligible for the one $2,000 payment he received when he was out of work during the first month of the pandemic.

"I felt like I just got robbed by my own government," he said.

In December, the auditor general reported that $4.6 billion in pandemic benefits went to ineligible recipients. By law, the federal government has 36 months from the time benefits are paid to confirm that a payment was proper.

While that $4.6 billion total includes other pandemic programs — such as the wage subsidy and the caregiver benefit —  the CRA has been sending notices to CERB recipients it believes have received funds in error.

As of mid-April, over one million such notices have been sent out, said the agency. While multiple notices can be sent to a single recipient, the CRA said roughly 775,000 people have repaid money so far — nearly $1.4 billion. CRA said it has recovered $237 million through offsets such as holding back tax refunds.

Gerry Campbell, director of operations for Liberty Tax in Toronto, said he's heard from a number of clients whose refunds were withheld. Campbell said the notices offer little information on which rules his clients violated.

"I found it confusing now trying to help clients sort out their mess," he said. "It's not easy trying to extract from the ... letters what it is they are really wanting to claw back."

When reached for comment, National Revenue Minister Diane Lebouthillier's office referred CBC News to the CRA.

The agency said those who believe they were eligible for the payments can ask for a review.

"Many factors can influence a taxpayer's debt. That is why we encourage Canadians to contact the CRA if they have any questions about their file," a CRA statement said.

Cornelius said he's called the agency a number of times and has been told that nothing can be done.

"I'd be better off walking and talking to a Canadian goose to try and explain my problem," Cornelius said. "They'll probably respond with the exact same thing. They'll hiss at me and honk because they don't care."

D.T. Cochrane, of the advocacy group Canadians for Tax Fairness, said withholding refunds is too harsh a tactic, even in situations where the recipient wasn't eligible.

"That's far too punitive for the situation that's being dealt with. A lot of people in the uncertainty of the pandemic applied for these relief programs and honestly believed that they were eligible," Cochrane said.

Refund taken after establishing payment plan

The government has said in the past that it would be flexible with those who owe money after receiving the CERB. 

Amanda Patrick of St. Albert, Alta., said she doesn't feel the CRA was flexible in her case.

Patrick received an extra CERB payment in 2020 and offered to pay it back immediately. But when she contacted the CRA to do so, she was told not to worry about it at the time.

"I was like, 'I think you gave me money when I wasn't supposed to [get it].' But they had told me, 'No, you're good,'" she said.

When Patrick received a notice last year asking for the money back, she said she was no longer in a position to repay the money in full. She said she contacted the CRA and worked out a payment plan that wouldn't put a burden on her or her family. She said she was told her refund would still be held back.

Patrick said she understands that she needed to pay the money back but she wishes she could have kept her payment plan instead — especially given the rapid pace of inflation over the past year.

"That [tax refund] would have helped me get ahead. That would have helped me be above water, like I could have started fresh," she said.

Campbell said automatically clawing back a refund when a taxpayer has a debt is the "modus operandi for the CRA."

"The payment plan they're happy to accept, but when they are giving the [refund] money out, they make sure that their bill is paid first," he said.

Cochrane said the CRA should show the same flexibility in reclaiming pandemic benefits it did when the agency handed the money out.

"After proving just how flexible it could be in the early days of the pandemic, the CRA has forgotten those lessons," he said.