Navigating CRA Denials of COVID-19 Benefits: Eligibility Challenges, Legal Recourse, and Practical Strategies

The COVID-19 pandemic prompted the Canadian government to introduce critical financial supports such as the Canada Emergency Response Benefit Act (CERB), Canada Recovery Benefits Act (CRB / CRCB) programs. Administered by the Canada Revenue Agency (CRA), these programs were lifelines for many, yet strict eligibility criteria and rigorous post-payment reviews have resulted in numerous denials and repayment demands. Drawing from CRA review letters and Federal Court decisions, this article explores the legal framework governing benefit eligibility, common reasons for denials, the administrative and judicial review processes, and actionable strategies for navigating disputes.

Eligibility Criteria for COVID-19 Benefits: Statutory Requirements and CRA Interpretations

The CERB, CRB and CRCB were designed to support Canadians whose income or work was disrupted by the pandemic, but each program imposed distinct eligibility thresholds rooted in legislation:

• CERB (Canada Emergency Response Benefit Act, s. 8): Applicants must have ceased working or had reduced hours because of COVID-19 and must not have earned more than $1,000 in employment or self-employment income during the applicable payment period. The CRA includes various income types in this calculation (e.g., tips, honoraria) but excludes pensions and student loans. Income is considered earned when work is performed, not when payment is received, often leading to misunderstandings.
• CRB (Canada Recovery Benefits Act, s. 3(1)(d)): Applicants needed a 50 percent reduction in average weekly income compared with the previous year because of COVID-19. Self-employed individuals had to demonstrate at least $5,000 in net income (revenue minus expenses) in 2019 or the 12 months preceding the application. Courts have upheld the CRA’s strict net-income test over gross-income arguments (Flock v. Canada, 2022 FCA 187).
• CRCB (Canada Recovery Benefits Act, s. 10): Eligibility required a 50 percent reduction in scheduled work hours owing to caregiving responsibilities tied to COVID-19 (e.g., school closures). Applicants needed to prove employment or self-employment before applying and provide evidence of caregiving needs.

Planning Tip: Maintain records of income and work status during benefit periods, noting dates when work was performed and sources of earnings, to ensure alignment with CRA criteria.

Documentation Challenges: Meeting the CRA's Evidentiary Burden

The CRA’s verification process is rigorous, often requiring detailed documentation to substantiate eligibility. Depending on employment status, the agency expects:

• Employees: Pay stubs, Records of Employment, employer letters confirming COVID-19-related work stoppage or reduction, and bank statements showing payroll deposits.
• Self-employed individuals: Invoices with service dates and client details, payment receipts, and documents verifying net income from a trade or business. Bank statements alone are insufficient without clear identification of income sources (Hu v. Canada, 2024 FCA 215).
• CRCB applicants: Correspondence from schools or care facilities confirming closures, medical notes for family members requiring care, and evidence of work reduction.

Common pitfalls include misclassifying income (e.g., reporting self-employment income as “Other Income”) and failing to supply translated or verifiable records for non-traditional payment methods (such as WeChat Pay). Cases like Ghukasyan v. Canada (2025 FC 140) illustrate how insufficient documentation can lead to upheld denials even when income appears to meet thresholds.

Planning Tip: Organize financial records with clear identifiers (client names, dates) and retain contemporaneous evidence of work interruptions or caregiving responsibilities to withstand CRA scrutiny.

CRA Revies Process: Administrative Steps and Repayment Obligations

When the CRA determines ineligibility, recipients face repayment demands. The process generally involves:

1. Initial assessment and review: The CRA notifies applicants of ineligibility and allows 45 days to submit supporting documents.
2. Second review: If the decision is disputed, a second review by a different officer can be requested within 30 days, accompanied by a clear explanation of disagreement and any new evidence.
3. Repayment notices: If ineligibility is confirmed, repayment is demanded—for example, up to $14,000 for CERB or $34,600 for combined CRB/CRCB. The CRA offers payment arrangements for financial hardship, accessible at 1-833-253-7615 or online at canada.ca/resolving-debt-cra. Amounts repaid can be claimed as tax deductions in the year of repayment.

Failure to repay can lead to collection actions, interest charges, and potential penalties for false statements. Reassessments of 2020 or 2021 tax returns may also be necessary when benefit repayments affect taxable income.

Planning Tip: Respond promptly to CRA notices, request second reviews with robust documentation, and negotiate payment plans if unable to repay in full.

Judicial Review: Legal Recourse and Limitations

If administrative reviews fail, applicants may seek judicial review in the Federal Court, which has exclusive jurisdiction over CRA benefit-eligibility decisions (Vetrici v. Canada, 2025 FCA 15). Key principles include:

• Reasonableness standard: Courts apply the Vavilov framework, deferring to CRA factual findings unless serious shortcomings render the decision unreasonable.
• Procedural fairness: The duty of fairness is at the lower end of the spectrum (Cozak v. Canada, 2023 FC 1571). Courts deem CRA communication methods adequate unless special circumstances exist, such as disability (Ghukasyan v. Canada, 2025 FC 140).
• Limited remedies: Courts seldom direct specific outcomes, preferring to remit decisions to the CRA unless eligibility is unmistakable (Vetrici v. Canada, 2025 FCA 15).
• Jurisdictional boundaries: The Tax Court lacks jurisdiction over benefit eligibility, focusing instead on tax assessments.

Planning Tip: Exhaust CRA review levels before pursuing judicial review, and concentrate on procedural flaws or unreasonable findings rather than mere disagreement with the outcome. Seek legal advice to assess the viability of a challenge.

Broader Implications and Takeaways

The CRA’s stringent application of eligibility criteria and documentation requirements reflects its commitment to protecting public funds but imposes a heavy burden on applicants, particularly the self-employed and those with non-traditional income. The deference courts show to CRA decisions highlights the importance of establishing a strong administrative record from the outset. Key lessons:

1. Precision: Understand and document compliance with specific income thresholds and situational criteria to avoid denials.
2. Robust documentation: Keep detailed, verifiable records of income, work stoppages, and caregiving needs.
3. Timely action: Act swiftly within CRA deadlines to prevent repayment obligations.
4. Realistic expectations: Recognize the limited scope of judicial review and prioritize administrative remedies.
5. Financial planning: Work with the CRA to explore hardship options and claim tax deductions for repaid amounts.

DISCLAIMER: This article provides general information only and does not constitute legal or tax advice. Readers should consult qualified professionals for guidance tailored to their specific circumstances.