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

Article content material

Till just lately, I by no means totally 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 together with his breed’s genetic disposition, I observed 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.

Article content material

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 among the excuses they give you can sometimes pressure credulity. Take two latest instances coping with COVID-19 advantages eligibility, and the taxpayers’ unwillingness (or, maybe, incapacity) to offer the required proof of earnings.

Article content material

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 complete 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 least $5,000 of (self-)employment earnings 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 US.

In December 2019, the taxpayer allegedly obtained a job supply to work remotely as an unbiased contractor for {an electrical} tools firm. On this position, 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 house, leading to her 2020 web self-employed enterprise earnings totalling $3,800. This was under the $5,000 earnings eligibility threshold to obtain CERB or CRB.

Article content material

Article content material

After consulting with an accountant, the taxpayer just lately amended her 2020 tax return and adjusted her use-of-home bills right down to $2,100 since, in keeping with her, “she additionally used her work space for research and leisure time.” After the modification, her self-employment web enterprise earnings was $5,900.

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

The taxpayer appealed the CRA’s second-level resolution to the Federal Courtroom requesting a judicial evaluation. The courtroom’s position is to not substitute its resolution for that of the CRA officer, however to find out whether or not the CRA’s resolution was “cheap” contemplating the information and proof. An affordable resolution 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.”

Article content material

The choose reviewed all of the proof, together with the CRA’s detailed and complete resolution experiences. In these experiences, the CRA agent famous the taxpayer had no earlier historical past of incomes self-employment earnings, and offered no documentation to assist that she had truly obtained the US$6,200, or that this quantity was despatched by 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 fee or the date of fee, and it wasn’t signed by both occasion. 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 offered 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 fee.

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

Article content material

The choose concluded the CRA agent had “meticulously assessed the proof offered by (the taxpayer) and located it was inadequate to ascertain her eligibility.” The choose, subsequently, dominated the CRA’s resolution 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 resolution of the Federal Courtroom involving a self-employed bookkeeper in British Columbia who operates his enterprise by a variety of firms. The CRA decided he was not entitled to the CRB on the idea he had not earned at the least $5,000 of (self-)employment earnings. In October 2022, the taxpayer applied for judicial review and succeeded on the idea that the CRA breached “procedural equity” by failing to advise him that it required additional documentation past his T4 and T4A slips.

Article content material

The CRA requested the taxpayer’s financial institution statements to confirm his earnings, however the taxpayer refused, saying: “I’m a personal citizen; I worth my proper to privateness and my civil liberties. I can’t expose private, non-public and confidential data similar 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 choose, who dismissed the taxpayer’s second request for judicial evaluation: “It’s (the taxpayer’s) proper to refuse to offer the requested data; nonetheless, he can’t 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 Non-public Wealth in Toronto. Jamie.Golombek@cibc.com.

For those who appreciated this story, join extra within the FP Investor e-newsletter.

Article content material