Strange excuses don’t sway courts after CRA denies CERB eligibility

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Till not too long ago, I by no means absolutely appreciated the which means behind the excuse, “The canine ate my homework.” That modified this previous summer season with the arrival of Jasper, our new golden retriever pet. Constant along with his breed’s genetic disposition, I seen he was a fast research when it got here to retrieving the newspaper from the entrance stoop. Sadly, by the point the paper made it inside, it was now not readable as he had shredded it to items.

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I can’t recall a taxpayer ever saying “the canine ate my homework” as a defence in courtroom for failing to offer backup documentation that the Canada Revenue Agency was requesting, however a number of the excuses they give you can sometimes pressure credulity. Take two latest circumstances coping with COVID-19 advantages eligibility, and the taxpayers’ unwillingness (or, maybe, incapability) to offer the required proof of revenue.

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The primary case, determined in late December 2023, concerned a self-employed taxpayer who utilized for and obtained the Canada Emergency Response Benefit (CERB) for the total seven four-week durations and the Canada Recovery Benefit (CRB) for the following 27 two-week durations. The CRA discovered her ineligible as a result of she had not earned at the very least $5,000 of (self-)employment revenue within the prior interval.

The taxpayer had prior work expertise conducting patent agent- and engineering-related work. In 2018, she labored as a patent agent trainee at a nationwide mental property regulation agency. Previous to this, she labored as a patent agent in the USA.

In December 2019, the taxpayer allegedly obtained a job supply to work remotely as an impartial contractor for {an electrical} tools firm. On this function, she was to offer patent-related recommendation and analysis to her consumer and be paid US$6,200 (or roughly $8,000 on the time). On the taxpayer’s 2020 tax return, she claimed $4,200 for bills regarding the enterprise use of her dwelling, leading to her 2020 internet self-employed enterprise revenue totalling $3,800. This was under the $5,000 revenue eligibility threshold to obtain CERB or CRB.

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After consulting with an accountant, the taxpayer not too long ago amended her 2020 tax return and adjusted her use-of-home bills all the way down to $2,100 since, based on her, “she additionally used her work space for research and leisure time.” After the modification, her self-employment internet enterprise revenue was $5,900.

Her COVID-19 advantages have been chosen for overview by the CRA, and an agent known as her requesting documentation to confirm her self-employment revenue. She subsequently supplied a single bill and a number of other letters from the corporate “with restricted element.” After conducting each a first- and second-level overview, the CRA decided she was not eligible as she hadn’t earned the requisite $5,000 of revenue.

The taxpayer appealed the CRA’s second-level choice to the Federal Courtroom requesting a judicial overview. The courtroom’s function is to not substitute its choice for that of the CRA officer, however to find out whether or not the CRA’s choice was “cheap” contemplating the details and proof. An affordable choice is “one primarily based on an internally coherent and rational chain of research that’s justified, clear and intelligible in relation to the relevant factual and authorized constraints.”

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The decide reviewed all of the proof, together with the CRA’s detailed and complete choice studies. In these studies, the CRA agent famous the taxpayer had no earlier historical past of incomes self-employment revenue, and supplied no documentation to assist that she had really obtained the US$6,200, or that this quantity was despatched by means of licensed mail.

As well as, the bill submitted to the company by the taxpayer didn’t point out whether or not it had been paid, the kind of cost or the date of cost, and it wasn’t signed by both celebration. The letter settlement was not a proper contract and solely briefly indicated the character of the engagement. However maybe most significantly, all of the paperwork the taxpayer supplied from the company have been created years after she claimed to have been paid the US$6,200, and failed to point the precise date of cost.

The CRA concluded the bill and accompanying letters from the company didn’t represent enough convincing proof of a cost having been made to the taxpayer within the absence of an precise switch or receipt of cash. The decide acknowledged that the taxpayer “is definitely entitled to be remunerated in money,” nevertheless it was her duty to keep up enough data to be able to depend on money funds to assist her eligibility for the CERB or CRB advantages.

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The decide concluded the CRA agent had “meticulously assessed the proof supplied by (the taxpayer) and located it was inadequate to ascertain her eligibility.” The decide, subsequently, dominated the CRA’s choice to disclaim the profit was cheap, because it had “all of the requisite attributes of transparency, justification, and intelligibility.”

The second COVID-19 advantages eligibility case, additionally determined in December 2023, was a follow-up choice of the Federal Courtroom involving a self-employed bookkeeper in British Columbia who operates his enterprise by means of plenty of corporations. The CRA decided he was not entitled to the CRB on the premise he had not earned at the very least $5,000 of (self-)employment revenue. In October 2022, the taxpayer applied for judicial review and succeeded on the premise that the CRA breached “procedural equity” by failing to advise him that it required additional documentation past his T4 and T4A slips.

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The CRA requested the taxpayer’s financial institution statements to confirm his revenue, however the taxpayer refused, saying: “I’m a personal citizen; I worth my proper to privateness and my civil liberties. I can not disclose private, non-public and confidential data equivalent to financial institution statements as I worth my proper to privateness and my civil liberties, as a personal citizen. Personally, I’m not a enterprise. Asking for my private, non-public and confidential statements, is a breach of my civil liberty.”

This didn’t go over effectively with the decide, who dismissed the taxpayer’s second request for judicial overview: “It’s (the taxpayer’s) proper to refuse to offer the requested data; nevertheless, he can not now criticize that the CRA decided it had inadequate data to assist his declare.”

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Personal Wealth in Toronto. Jamie.Golombek@cibc.com.

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