The CRA is seeking to recover $3.2 billion in benefits that were overpaid during the Covid-19 pandemic. They have already sent out 825,000 notices to Canadian individuals and businesses who received either excess payments or who were ineligible to receive them. Here’s what to do if you received a notice of redetermination.
Why is the CRA Seeking to Recover These Amounts?
The majority of the overpaid benefits are attributed to the Canada Emergency Response Benefit (CERB) program, which was created by the government to provide financial assistance to those affected by the pandemic. Other programs include the Canada Emergency Student Benefit (CESB), the Canada Recovery Benefit (CRB), the Canada Recovery Caregiving Benefit (CRCB), the Canada Recovery Sickness Benefit (CRSB), and the Canada Worker Lockdown Benefit (CWLB).
Budget officer Yves Giroux believes that the same mistakes might occur with the launch of the Canada Dental Benefit and the top-up of the Canada Housing Benefit. What all of these benefits have in common is that they are attestation-based, — meaning that the government of Canada relies on the taxpayer’s good-faith claim — making them an easy target for fraudsters.
The CRA is taking a number of steps to ensure that it is able to recover the overpaid benefits. It is sending out notices to individuals and businesses who have been identified as having received overpayments and is also conducting audits to ensure that the overpayments are being returned.
The Canada Revenue Agency’s Collection Process
The CRA has a number of collection processes in place to ensure that the overpayments are being recovered.
Beginning in November 2021, the CRA started sending out Notices of Redetermination in order to inform Canadians of overpayment related to Covid-19 benefits. The Canada Revenue Agency investigators will keep examining applications until what is predicted to be at least until the year 2025.
It’s important to take the necessary steps to pay back the overpayment, since the CRA may be able to take legal action against individuals and businesses who have not repaid them after receiving their letter of redetermination. This could include garnishment of wages, a lien on property, or seizing and selling your assets.
Before starting any legal action, they will first make three attempts to give you a verbal warning by phone. They will then send you one written legal warning letter. If you still do not make any efforts to repay your debt, they will begin the process of collections.
How to Respond to a Notice of Redetermination
If you receive a notice of redetermination from the CRA, it is important to respond promptly and accurately. You should also read the notice carefully to ensure that you understand the amount of the overpayment and the time period in which it must be returned.
If you are able to, you should make arrangements to repay the overpayment as soon as possible. You may be able to set up a repayment plan with the CRA to help manage it. If you are unable to repay the overpayment, you should contact the CRA to discuss your options.
Can Overpayment of Benefits Affect Your Credit Score?
Minor tax debts usually will not affect your credit score since they are usually quickly resolved between the CRA and the taxpayer. However, escalation can occur if the CRA receives no communication. It is at this point that the overpayment of benefits can potentially have a negative impact on your credit report.
If you have received a letter of redetermination and have not taken the steps to communicate with the CRA to repay it, the CRA has the right to register a tax lien on your credit report or hire a collection agency to collect your debts. This, in turn, can lower your credit score. A lower credit score can make it more difficult for you to obtain credit, loans and mortgages in the future.
How to Pay off your Debts
If you have received an overpayment, it is important to make arrangements to repay the debt as soon as you can. Contact the Canada Revenue Agency to set up a payment plan or to try to determine what options are available to you in terms of repayment relief.
If you’ve already contacted the CRA but still cannot find any means of repaying your debts after receiving a notice of redetermination, contact a Licensed Insolvency Trustee. Your LIT will analyze your personal financial situation and guide you through different solutions that are available to you. They will help you through the entire debt solution process in order to help you get back on the right track.