TORONTO -- The CRA quietly updated its website more than two weeks after Canadians started applying for the Canada Emergency Response Benefit (CERB) to include a critical detail that was left out when applications opened in early April.
Some CERB recipients say the omission is part of a larger series of mistakes and mixed messages from the CRA and the federal government in the early rollout of the benefit, and they’re now on the hook to repay every dollar.
Some self-employed Canadians have received letters asking them to repay up to $14,000 by Dec. 31 because they never qualified for the CERB. In many of these cases, recipients made more than $5,000 gross income in 2019 but less than $5,000 net income, which is calculated after expenses.
To apply for CERB, an individual needed to have made at least $5,000 in 2019 or in the 12 months before they applied, according to the CRA website.
Net income was never mentioned on CERB applications or the CRA’s online page describing who is eligible, although it does appear on a separate "questions and answers" page.
But that wording wasn’t always there. When applications for the CERB opened on April 6, there was no mention of net income anywhere on the Q&A page, according to online archives of the page.
Sometime between April 21 and April 25, the CRA added a section related to self-employed Canadians specifying that “owners who rely on business income should consider their net pre-tax income (gross income less expenses).”
There remains no mention of net income on the CERB’s “who is eligible” page online. The word “net” also doesn’t appear anywhere on legislation passed in the House of Commons in March to create the benefit.
Last week, the CRA told CTVNews.ca that eligibility for the CERB was always based on net income, not gross, and that “there has been no change to this position during the lifecycle of the CERB.”
Confusing messages have also come directly from the Liberal government. In the early days of the pandemic, then-finance minister Bill Morneau used the word “revenue” when describing the eligibility criteria for an individual’s income. Revenue accounts for gross income before deductions, not net income.
“Every Canadian that finds themselves in the situation where they’ve earned revenue in the past 12 months of $5,000 or more and they don’t have any income as a result of COVID-19, they can get this benefit,” Morneau said during a press conference on March 25.
Nancy Reid is among those Canadians frustrated by the early communications from the government. She started a dog training and boarding business out of her home in New Brunswick seven years ago. Due to her CPP disability pension, she’s limited by the amount of extra income she can make, to about $6,000 per year before deductions.
She applied for the CERB as soon as it was available.
“Because of the pandemic, my age and underlying health conditions, it became far too risky for me to be in regular contact with people,” she told CTVNews.ca on Tuesday.
But before applying, Reid said she studied the CERB application and online material for any mention of net income. She couldn’t find anything.
“I consider myself financially literate and so, yes, I do know the difference. However, gross and net were not mentioned anywhere on the application process,” she said.
“I read and re-read it several times, dove deep into the other linked information pages and press releases, checked my tax statement from 2019, and it seemed clear I was eligible.”
So she was shocked when she received a repayment letter last week. She’s already spent her CERB funds and is now considering selling her home to afford the repayment — something that she says would spell the end of her home business.
“I kind of feel like I was conned and the government should suck up their obvious mistake. That money is gone — into groceries, heating bills, medicine ... gone.”
She’s reached out to her local MP, Jenica Atwin with the Green Party, asking for help. Ideally, she’d like to see the government forgive CERB recipients in her predicament.
“I would like the government to admit it wasn't clear on the application website,” she said. "That it was being sneaky and dishonest to go in and add the ‘net’ part to the web information long after CERB first came out.”
ALLEGATIONS OF CONFUSION AMONG CRA AGENTS
Concerns have also been raised about messaging from CRA agents. Nils Damborg from Nanaimo, B.C., is retired and relies on sales from craft fairs to supplement his pension. He sells furniture and cutting boards and brings in about $18,000 gross income per year, but that drops down to $3,000 net income after expenses — mostly materials and booth rentals at fairs.
He and his wife both applied for CERB and together received about $20,000. But they were wary to spend it.
“We just put the money in the bank and said we better not use this, because I have a feeling things are going to change,” Damborg said.
Last month, Damborg decided to retroactively apply for CERB to cover some months earlier in the year due to cancelled craft fairs. He called the CRA to check if this was OK, and if he qualified for CERB in the first place based on his gross income.
Damborg said the agent pulled up four years of his tax returns and double-checked the rules with a supervisor.
“He asked some questions and said, ‘No, you definitely qualify,’” he said.
Then, after he received a letter requesting repayment, Damborg called the CRA a second time. This time he was given the opposite message: he didn’t qualify for CERB, despite the previous confirmation.
Damborg said he’s glad he didn’t spend the CERB money, but it’s frustrating that he was given the runaround by the CRA. Both times he called, the agents didn’t seem to understand the problem and had to double-check with supervisors, who came back with conflicting guidance.
“They both didn’t know that the net is problem,” he said.
Responding to allegations of confusing information from CRA agents, CRA spokesperson Etienne Biram said the agency “takes every effort to ensure its call agent staff and its resources provide the right information that Canadians depend on, and continues to take efforts to do so.”
Biram added that the CERB was rolled out quickly in order to provide immediate relief for Canadians in the early days of the pandemic.
“The CRA’s focus remains supporting Canadians through this crisis,” he said.
GREENS CALL FOR 'COMPASSIONATE PLAN'
The CRA has said that it is giving more time and flexibility to CERB recipients to repay what they owe. However, if the CERB money isn’t returned by Dec. 31, these recipients will be sent tax slips for these payments.
Anyone who received CERB but didn’t qualify based on their net income will be expected to repay the funds, the CRA said.
Asked about CERB eligibility in question period last week, Prime Minister Justin Trudeau said that the goal in the early days of the pandemic was to quickly establish financial aid for Canadians as the economy ground to a halt. Now, he said, efforts are being made to verify those payments “on the back end.”
"The rules did not change, but we indicated to Canadians that we will work with them if people made good-faith mistakes," he said.
Green Party Leader Annamie Paul has urged the Liberal government to put a temporary pause on repayments until 2021 and called on the CRA to propose “a much more compassionate plan.” At a press conference last week, Paul said it was always understood that some Canadians might apply for CERB in good faith but not be eligible.
“And so to send them a notice in December just as we’re entering the holiday season and while we’re in a second wave demanding payment within a month to people who may end up having payments of up to $14,000 is simply not in the spirit of this moment.”
The CRA confirmed Monday that it has sent 441,000 “educational” letters to Canadians who may need to repay the benefit. Not all of those recipients are affected by the net income issue but could be subject to repayment for other reasons.
