Navigating CERB and CRB Disputes
Audits and Repayments for the Self-Employed
The COVID-19 relief benefits were intended to support workers during lockdowns that closed businesses. However, for many self-employed Canadians, this assistance has led to ongoing disputes with the Canada Revenue Agency (CRA). These audits often affect freelancers, gig-economy workers, and small-business owners, whose income can vary. The disputes frequently involve complex rules, such as whether to use net or gross self-employment income, or how to prove a 50 percent reduction in average weekly earnings.
Under the Canada Emergency Response Benefit (CERB), applicants needed to live in Canada, be at least 15 years old, and have earned at least $5,000 in employment or self-employment income in 2019 or the 12 months before applying. They also had to stop working or have reduced hours due to COVID-19 and earn no more than $1,000 during each four-week period. The Canada Recovery Benefit (CRB), which replaced CERB in late 2020, allowed self-employed individuals ineligible for Employment Insurance to receive $1,000 or $600 every two weeks if they were not working due to the pandemic or if their average weekly income fell by at least 50 percent. These rules appeared simple but were difficult to apply in practice. Some applicants who used gross revenues or miscalculated income limits now face demands for repayment. Others have been denied due to missing documents or differing interpretations of reduced hours by the CRA.
CERB and CRB Disputes
In some cases, the CRA applies its guidance incorrectly, such as by requiring net income evidence when the law allowed gross figures, or by overlooking evidence that a business closure was related to COVID-19.
Much of the work involves gathering and organizing facts. I have experience handling these matters. Success often depends on showing that a self-employed person earned at least $5,000 in the required period and that their income decreased significantly due to public health measures. To do this, it is helpful to collect tax returns, business records, invoices, and bank statements. A strong set of evidence is important, as courts have ruled that tax returns, while not final, are the main record of income and should be supported by other documents from the time.
Comprehensive Submissions
When clients contact me, they are often concerned about CRA questionnaires or letters demanding repayment of thousands of dollars. My approach is to prepare comprehensive appeal packages that address all questions. Rather than providing minimal responses, I research relevant case law, gather financial documents, create detailed timelines, and prepare for any points the CRA might raise.
For self-employed individuals, this usually requires more than basic records of income and expenses. It includes third-party evidence, such as customer cancellation notices, provincial emergency orders, and records of new work. Showing that a business closure or income reduction was directly linked to COVID-19 restrictions is key, as the CRA might otherwise claim the decline was unrelated to the pandemic.
After assembling the facts, I prepare an analysis for each period. For CERB, this involves dividing monthly revenue into four-week periods to confirm that income did not exceed $1,000 in any period. For CRB, spreadsheets are used to calculate a 52-week average of earnings and compare it with income during each two-week benefit period, ensuring the drop was at least 50 percent. This analysis provides clear calculations and strengthens the case if an application for Judicial Review at the Federal Court is needed.
Common Situations: Shutdowns and Income Loss Related to the Pandemic
Another frequent situation involves self-employed taxpayers whose income decreased sharply but did not reach zero. For CERB eligibility, claimants had to earn no more than $1,000 during each four-week period. For CRB, their average weekly income needed to fall by at least 50 percent. To show compliance, revenues are often prorated by period and compared with a pre-pandemic baseline. When revenue gaps occur but some payments continue, spreadsheets that assign income to the correct periods can demonstrate that limits were met.
Uncertainty about net versus gross income has also caused difficulties. Early in the CERB program, it was unclear if self-employed applicants should use net income (after expenses) or gross revenue to meet the $5,000 requirement. In February 2021, the government stated that gross revenue could be used if all other criteria were met. Despite this, many still receive repayment demands because the CRA calculates net income below the threshold. In these cases, it is important to refer to the government's statement and provide invoices and receipts showing gross revenue above $5,000, along with proof that the relevant tax returns were filed. Legal decisions emphasize that the CRA must apply policy changes fairly and cannot disregard evidence that a claimant used gross income in good faith.
