Six Years Later, the CRA Is Still Coming for Your COVID Benefits — And It’s Getting Serious
In 2020, the federal government told Canadians to stay home. Millions did. And for those who lost work — freelancers, gig workers, restaurant staff, contractors, self-employed professionals — the Canada Emergency Response Benefit (CERB) and its successor, the Canada Recovery Benefit (CRB), were supposed to be the safety net.
Six years later, that safety net has become a debt trap for hundreds of thousands of people who believed they did everything right.
The Canada Revenue Agency has now made it abundantly clear: this is not winding down. It is ramping up. And the consequences for ignoring it are no longer theoretical — they are showing up in frozen bank accounts, garnished wages, and seized tax refunds.
The Numbers Tell the Story
The CRA distributed approximately $84 billion in COVID-19 benefits to individuals during the pandemic. Of that, the Agency says roughly $10 billion remains outstanding in overpayments it intends to collect. About $4 billion has already been recovered. The rest is the subject of an aggressive, multi-year enforcement campaign that has now entered its most serious phase.
Since July 2024, the CRA has been issuing legal warnings and taking enforcement action — including wage garnishments and bank account freezes — against individuals who have not cooperated or responded to collection attempts. And in 2026, this approach has only intensified. Insolvency professionals across the country report that the CRA’s posture has shifted meaningfully in recent months, with garnishments becoming routine rather than exceptional.
This is not just about people who committed fraud. The vast majority of those being contacted are ordinary Canadians — people who applied in good faith during a period of rapidly changing rules, contradictory guidance, and enormous personal stress. A Montreal artist recently featured on Global News captured the frustration perfectly: she was shocked to learn the CRA was demanding she repay more than $12,000 in CERB payments she believed she was fully entitled to. As I commented in that segment, her situation is far from unusual — it reflects a pattern playing out in mailboxes and inboxes across Canada.
Why Good-Faith Applicants Are Getting Caught
The eligibility rules for CERB and CRB were deceptively simple on paper but difficult to apply in practice — especially for the self-employed.
CERB required applicants to have earned at least $5,000 in employment or self-employment income in 2019 or the 12 months before applying, to have stopped working or had their hours significantly reduced due to COVID-19, and to have earned no more than $1,000 during each four-week eligibility period.
CRB, which replaced CERB in late 2020, required a 50% reduction in average weekly income compared to pre-pandemic levels, among other criteria.
The problems arise in how these rules interact with the realities of self-employment. Income can fluctuate. Revenue does not always arrive in neat four-week blocks. And the question of whether to use net or gross self-employment income — a source of genuine confusion in 2020 — was not formally clarified until February 2021, when the government confirmed that gross revenue could be used to meet the $5,000 threshold. Despite that clarification, the CRA continues to issue repayment demands based on net income calculations, catching applicants who relied on gross figures in good faith.
Other common issues include missing documentation from five or six years ago, income that fell close to but not below the $1,000 threshold when properly prorated by period, and difficulty proving that a business decline was specifically caused by COVID-19 rather than other factors.
The CRA’s Review Process — and Where It Breaks Down
When the CRA initiates a review, it typically sends a questionnaire or letter asking the applicant to prove their eligibility. If the response is unsatisfactory — or if no response is received — the CRA issues a Notice of Redetermination declaring the applicant ineligible and demanding full repayment.
The applicant can then request a second administrative review, which is conducted internally by the CRA. If that review upholds the original decision, the applicant has 30 days to file an application for judicial review at the Federal Court of Canada. Miss that window, and the options narrow dramatically.
Here is where things get important: the CRA’s internal reviews are not always conducted with the care and rigour the law requires. In my practice, I regularly see files where CRA reviewers have ignored evidence, failed to address arguments, applied the wrong legal standard, or — in an increasing number of cases — relied on automated systems to make initial eligibility determinations.
Some of these automated “first reviews” bear internal identifiers like BOT067G or BOT056G, suggesting they were generated by algorithms rather than by human agents exercising discretion. This raises a serious legal question: under the Canada Revenue Agency Act, the Minister’s powers must be exercised by “persons employed or engaged by the Agency.” An algorithm is not a person. If the CRA is delegating eligibility determinations to automated systems without proper legal authority, those decisions may be unlawful — and vulnerable to challenge.
This is an argument I am actively advancing in multiple files before the Federal Court, and it has significant implications for anyone whose benefits were denied following what appears to have been an automated review.
What the Federal Court Actually Does
Judicial review is not an appeal. The Federal Court does not re-decide your case. Instead, it asks whether the CRA’s decision was reasonable — meaning whether it was justified, transparent, and intelligible in light of the evidence and the law. The court also examines whether the process was procedurally fair: Did the CRA give you a meaningful opportunity to respond? Did it consider the evidence you provided? Did it explain why it rejected that evidence?
The leading framework comes from the Supreme Court of Canada’s decision in Canada (Minister of Citizenship and Immigration) v. Vavilov, which sets the standard for reviewing administrative decisions. In practice, courts have found CRA decisions unreasonable where reviewers failed to explain why they rejected invoices or other documentation that the CRA’s own guidelines identified as acceptable proof of income.
If the Federal Court finds the decision unreasonable or the process unfair, it sends the matter back to the CRA for a fresh review by a different officer. In many cases, this leads to settlement — the Department of Justice, recognizing the weaknesses in the CRA’s position, agrees to resolve the matter before a new decision is even rendered.
The Real Cost of Doing Nothing
There is no statute of limitations on government debt. The CRA can — and does — pursue these amounts indefinitely. The tools at its disposal include:
Offsetting refunds and credits: Your income tax refund, GST/HST credit, and other government payments can be seized automatically — even if you have a payment arrangement in place.
Wage garnishment: The CRA can direct your employer to withhold up to 30% of your pay before it reaches you.
Bank account freezes: Funds in your bank account can be frozen without advance notice.
Third-party demands: The CRA can require anyone who owes you money to redirect those payments to the Agency.
There are no penalties or interest on COVID-19 benefit overpayments — but that is cold comfort when your wages are being garnished or your refund has disappeared.
The one thing the CRA cannot do is erase your legal rights. Even in the face of enforcement action, the right to challenge an unreasonable decision through the courts remains available — but only if timelines are respected.
Why a Tax Lawyer, Not Just an Accountant
Pandemic benefit disputes are not accounting problems — they are legal problems. They involve questions of statutory interpretation, administrative law, procedural fairness, and the standard of reasonableness under Vavilov. They require familiarity with Federal Court practice, the ability to draft affidavits and memoranda of fact and law, and experience negotiating with Department of Justice counsel.
Only a lawyer can represent you in Federal Court. Only a lawyer’s communications are protected by solicitor-client privilege. And only a lawyer experienced in this specific area can assess whether the CRA’s decision in your case is actually defensible — or whether it collapses under scrutiny.
What You Should Do Right Now
If you have received a CRA letter or questionnaire about your COVID-19 benefits: Do not ignore it. Respond — but respond strategically. A comprehensive, well-organized submission at the first review stage can resolve the matter before it escalates.
If you have received a Notice of Redetermination: You have the right to request a second review. This is your opportunity to present a complete evidentiary package — tax returns, bank statements, invoices, third-party records, and a period-by-period analysis — supported by relevant case law.
If your second review was denied: You have 30 days to file for judicial review at the Federal Court. This deadline is strict and cannot be extended without a motion. Do not wait.
If you are already facing collection action: Even at this stage, options exist. Payment arrangements can be negotiated. And if the underlying decision was flawed, it can still be challenged.
