I. Introduction
The COVID-19 pandemic has affected millions of Canadians, some seeing their working hours and income severely reduced while others lost their employment completely. As a response, the Canadian government installed the CERB (Canada Emergency Response Benefit). The CERB was a financial support program by the federal government to support employed and self-employed Canadians who were directly affected by COVID-19. Any eligible Canadians were entitled to $2,000 for a 4-week period (the same as $500 a week).
The Benefit was available to workers who met the following eligibility criteria:
- you were residing in Canada and were at least 15 years old.
- you stopped working because of reasons related to COVID-19 or were eligible for Employment Insurance regular or sickness benefits or have exhausted your Employment Insurance regular benefits or Employment Insurance fishing benefits between December 29, 2019, and October 3, 2020.
- you had employment and/or self-employment income of at least $5,000 in 2019 or in the 12 months prior to the date of your application, and
- you did not quit your job voluntarily
When submitting a first claim, you could not have earned more than $1,000 in employment and/or self-employment income for 14 or more consecutive days within the four-week benefit period of your claim.
When submitting subsequent claims, you could not have earned more than $1,000 in employment and/or self-employment income for the entire four-week benefit period of your new claim.
During an inquiry into the Benefit, it was discovered that a large number of individuals received CERB benefits despite not meeting the eligibility requirements, which has led to a CRA and a government audit to target CERB recipients to determine if they were eligible in the first place and if they might have to repay the received benefits.
In this blog, we will have a look at what a CERB audit is, what you have to do if you were selected for an audit and what options you have.
II. What is a CERB Audit?
Definition of CERB Audit
Due to the findings of the above-mentioned inquiry, the CRA has issued over 650,000 letters to Canadians regarding the verification of CERB eligibility, the validation of CERB applications, and finally, the potential repayment of CERB.
For the audit, the CRA is particularly targeting CERB recipients for whom it cannot confirm employment or net self-employment income of at least $5,000 earned in 2019 or the 12 months prior to applying to CERB, which had been one of CERB’s eligibility criteria. In these cases, the CRA may ask for any or all of these documents to verify that all eligibility requirements have been met:
- Recent pay slips
- Employer name and address
- Record of Employment
- Statement of Benefits
- Invoice for service(s) rendered
- Receipt of payment for service(s) provided
Reasons for getting audited
There are several reasons why the CRA may audit you. The most common reason is that you did not meet any or all of the eligibility criteria as outlined above, have returned to work earlier than expected or received retroactive pay from your employer. It could be a case of applying for CERB before realizing you were not eligible. Another reason could be that you have received the Benefit from both Services Canada and the CRA for the same period.
Types of CERB audits
There are basically two types of CERB audits. For one, there is a CRA audit of your taxes to show if you were eligible for the CERB payments. If they find that you were not eligible, you will be asked to pay back the benefits to the CRA. For the other, there also is a government audit that looks at the CERB program as a whole, which is conducted by a government-appointed auditor and could lead to individual tax audits and can result in demands to pay back benefits as well.
III. Steps to Take If You Get Audited
Gather all necessary documents and information
It is critical to gather all necessary and relevant documents and information that could help you establish that you did meet all eligibility criteria, such as
- Recent pay slips
- Employer name and address
- Record of Employment
- Statement of Benefits
- Invoice for service(s) rendered
- Receipt of payment for service(s) provided
It is likely that the CRA will send you a list of which documents they will require you to submit, so it is best to be prepared.
Respond promptly and honestly
When you receive a letter from the CRA that you are being audited, it is essential to respond as soon as possible. This means submitting every document requested and any information that could help you verify that you did not receive CERB payments you shouldn’t have. It also is absolutely critical to be completely honest and open even if documents might indicate that you were not eligible. The CRA can verify submitted documents and information against payroll records, so any inconsistencies will very likely be held against you.
Understand the possible outcomes
Unfortunately, once the audit determines that you have not met one or all of the eligibility criteria or have received double payments from the CRA and Service Canada, there is not much you can do to influence the outcome, and you will be required to pay back all ineligible CERB payments. CERB had paid $500 per week and was available for a maximum of 28 weeks, so if you received every CERB cheque for the complete duration of CERB, you would have received a total of $14,000. In the worst case, the audit might find you ineligible for the full 28 weeks, requiring you to pay back the entire amount, which could put a significant financial burden on you.
Seek professional help if needed
If you have received an audit notice from the CRA and are facing a substantial amount to repay, it can put a great financial burden on you. If you struggle to repay the amount, it is recommended to contact a financial professional to help you explore the different options open to you. Contact one of our experienced Licensed Insolvency Trustees today to learn how we can help you find the best way to repay your benefit. Risman Zysman offers free, confidential, no-obligation consultations to help get you on the path to financial recovery.
IV. Common Audit Issues
Mistakes while filling out CERB application
Common mistakes while filling out CERB applications were
- applying without realizing you were not eligible
- applying for and receiving CERB payments from both the CRA and Service Canada in the same eligibility period
- receiving social assistance benefits
- applying for CERB twice in the same period
- earning more employment or self-employment income than expected.
Eligibility criteria issues
One of the main issues regarding eligibility concerned income requirements. For one, you had to have earned a minimum of $5,000 during the previous year; however, pensions or student loans and bursaries were not considered employment income and did not count towards the requirement.
Also, the $1,000 income limit to earnings from employment and/or self-employment was a common misconception/mistake regarding eligibility. As far as CERB was concerned, “income was considered to be earned at the time work is performed and not when payment is received. Self-employed workers must assess their earnings to determine whether they earned more than $1,000 during that period, regardless of whether they received a payment.”
Another large issue was that individuals would quit their job due to the pandemic, but voluntarily quitting your job was a criterion that would disqualify you from the CERB benefit.
Even if you met all eligibility requirements, there is one issue that often came up after the fact. If you have returned to work earlier than expected or received retroactive pay from your employer, it would make you ineligible and, depending on the timeframe, require you to pay back the difference.
Failure to report changes in employment status
If you failed to report a return to work within an eligibility period you were approved for, you lost your eligibility for the CERB benefit. This was a very common occurrence and, in most cases, an oversight, and the CRA generally treated it as a good faith application, foregoing penalties or interest.
V. Conclusion
CERB had been a benefit designed to help Canadians with the negative financial consequences of the COVID-19 pandemic. It supported individuals who had lost employment due to the pandemic or suffered from reduced hours and income. They had to meet strict requirements to ensure that eligible persons would receive the benefit.
If the CRA selects you for an audit, you must respond promptly with all required documents and information to prove that you have met all eligibility requirements for the full period you have applied for. It is critical that all documents and information are fully correct, as the CRA is able to verify all submitted information against payroll records.
Suppose you require help with a CRA audit or have issues with the repayment of CERB benefits. In that case, it is essential to contact one of our experienced Licensed Insolvency Trustees today at 416-222-4600 to find out how we can help you find the best way to repay your benefit. Risman Zysman offers free, confidential, no-obligation consultations to help get you on the path to financial recovery.
Frequently Asked Questions
What is CERB, and why might I face an audit?
CERB was a financial support program by the federal government to support employed and self-employed Canadians directly affected by COVID-19. Any eligible Canadians were entitled to receive $2,000 for a 4-week period (the same as $500 a week). If the CRA found that you did not meet the eligibility requirements, it could order an audit of you and your documents to verify that you were eligible for the benefits received.
What documents should I keep if I applied for CERB?
You should keep the following:
- Recent pay slips
- Employer name and address
- Record of Employment
- Statement of Benefits
- Invoice for service(s) rendered
- Receipt of payment for service(s) provided
What are the common reasons for a CERB audit?
The most common reasons for a CERB audit are not meeting the income requirements, both the minimum income prior to CERB and the maximum income during the benefit period, receiving benefits from both the CRA and Service Canada during the same benefit period, as well as returning to work earlier than expected or receiving retroactive pay from the employer.
How will I know if I am being audited for CERB?
You will receive a letter from the CRA regarding the verification of CERB eligibility, the validation of CERB applications, and the repayment of CERB.
What happens during a CERB audit?
During a CERB audit, you must make available to the auditor all of your relevant records (both paper and electronic) and supporting documents and provide complete and timely explanations to the auditor’s questions.
Can I refuse to provide documents or information during a CERB audit?
You cannot refuse to provide documents. Failure to provide required books and records is an offence under the law.
What are the potential consequences of a CERB audit?
The potential consequence of a CERB audit is you have to pay back all received benefits for any period you are found ineligible for.
What should I do if I realize I made a mistake on my CERB application?
If you realize that you made a mistake on your CERB application, it is recommended to contact the CRA immediately to notify them of this mistake. If this mistake makes you ineligible to receive the benefits, you should repay any amounts you received for that period.
How can I prepare for a CERB audit?
Keep all relevant documents proving your eligibility for the CERB benefits in case the CRA contacts you to be audited.
Do I need to hire a lawyer for a CERB audit, and if so, when should I do so?
You don’t require a lawyer for a CERB audit, but a financial professional can assist you with the preparation of the required documents. They also can help you with identifying the best options to repay your debt to the CRA.
