Canadians waiting to have their CERB eligibility status reviewed may still lose money to clawbacks

Canadians who may have received pandemic benefits by mistake are allowed to ask for a review of their eligibility status — but they might see their tax refunds or other benefits withheld by the Canada Revenue Agency (CRA) while they wait for a decision.

The CRA has sent over one million notices to Canadians it says received pandemic benefits — such as the Canada Emergency Response Benefit (CERB) — for which they weren't eligible.

The CRA has resumed efforts to recover the money through 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.

• Have you paid back money owed for pandemic benefits, but the CRA is still sending you collection notices? Send an email to ask@cbc.ca and tell us your story.

Those who believe they were eligible for the pandemic benefits they received and want to challenge their status can ask the agency for a review. But a number of Canadians say that while they've been waiting for a final decision, the CRA has withheld their tax refunds or other government benefits.

"I think that what the government is doing to people, especially people like me, is disgusting," said Maxine Malamud of Montreal.

Malamud said she applied for the CERB when she was out of work during the beginning of the pandemic. Since then, she said, she was injured in an accident that has made it extremely difficult for her to walk.

She said that when she applied and was approved for the federal disability tax credit last fall, she found out she owed the CRA $40,000 for CERB payments the government said she received by mistake.

"I'm not going to see any of it. Not a penny of that, because of this money [that] they're claiming from me that they state I was not eligible to receive," Malamud said. "And that's not true. I was eligible."

Malamud said she contacted the CRA and was told she could ask for a review of her status, as long as she could prove she earned more than $5,000 in the 12 months leading up to the pandemic.

Malamud said that since she gathered the relevant documents and mailed them to the agency, she hasn't heard of any progress on her case. In the meantime, she said, the government is still holding back her tax benefits.

The CRA said it's unable to say how many Canadians have asked for reviews of their cases. It said roughly $237 million of COVID-19 benefit debt has been collected through offsetting.

"It's sort of guilty until proven innocent as opposed to innocent until proven guilty," said Michael Thomson of Moncton, N.B. 

Thomson said his wife received notice that she owed $2,000 in CERB money she received last year. She challenged her eligibility status but has been waiting months for a final decision. The CRA withheld her tax refund this year, Thomson said.

"There's a frustration at the bureaucracy and the inadequacy of the system," he said.

Lisa Boos of Utopia, Ont., said her situation is even more complicated because she didn't even apply for the CERB.

Boos said she broke her wrist just before the pandemic began and applied for employment insurance sickness benefits while she was off work.

She was sent CERB money instead. "They just threw everybody on CERB," she said.

While she was able to return to work a few weeks later, Service Canada contacted her last year and told her she owed the government $1,500 for benefits she wasn't eligible to receive.

After making her case to the agent, Boos said, she only ended up owing $500 on a technicality and offered to repay it right away. She said she was told not to and to wait for a review of her case.

A year later, Boos said, she hasn't heard anything about a final decision and the CRA withheld the $1,500 from her tax refund.

"They took every penny of it when I filed my income tax," she said.

"I'm just flabbergasted that it's taken … almost been a year since [asking for a review of] my case," she said.

Most reviews completed within 'short timeframe': CRA

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

When asked how long these reviews typically take, the CRA said it depends on the situation.

"While a majority of cases are completed within a short timeframe, the CRA recognizes that some files are more complex than others and therefore may take longer to review," a CRA spokesperson said in an email.

D.T. Cochrane, of the advocacy group Canadians for Tax Fairness, said it's a "dereliction of duty" for the government to withhold money from people who are waiting for a review of their status.

"Given the fact that people were acting in good faith, we need the government to similarly act in good faith," he said. "Especially since early signalling was that, 'We are going to be as understanding as we can be about what is going on.'"

The Office of the Taxpayers' Ombudsperson announced earlier this month that it is monitoring complaints from people who say they are receiving collection letters from the CRA despite having repaid the government for pandemic benefits.

At the time, Lebouthillier's office told The Canadian Press that it welcomed the oversight.

In December, the auditor general reported that $4.6 billion in pandemic benefits — which includes other programs such as the wage subsidy and the caregiver benefit — 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.