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Jamie Golombek: Judge rules tax authorities’ rejection of claim was unreasonable and sends it back for reassessment

The taxi driver said he decided to stay at home temporarily at the start of the pandemic because he was concerned about the little-known risks of COVID-19, but was unable to return after that because no one took taxis. The taxi driver said he decided to stay at home temporarily at the start of the pandemic because he was concerned about the little-known risks of COVID-19, but was unable to return after that because no one took taxis. Photo by Postmedia

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The Canada Revenue Agency continues to prosecute taxpayers who may have incorrectly applied for the Canada Emergency Response Benefit (CERB) or its replacement, the Canada Recovery Benefit (CRB). Eligible individuals could have received $500 per week provided they earned at least $5,000 in net income in the previous year.

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I recently shared a story about a man from Cambridge, Ont., who in court challenged the CRA’s decision that he was ineligible for the CRB in 2020 for failing to earn $5,000 in income the previous year. I later described the case of a tutor who reportedly earned $5,250 in cash income and his claim before the CERB was dismissed. Both taxpayers lost their case.

The most recent CRB eligibility decision was announced earlier this month and involved a Quebec taxi driver with 25 years of experience who decided to stay home for a while on March 19, 2020 due to the COVID-19 pandemic, which is of particular concern. used to be. worry him because of his medical history.

His colleagues in the taxi industry then told him that it was not cost-effective to rent a taxi during the pandemic and that only taxi owners could survive. Because the taxpayer did not own his taxi and the owner refused to lower his rent, he stopped working.

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In October 2020, the taxpayer applied for the CRB. His request was accepted without review by the CRA and he began receiving the benefit. Fast forward to June 2021, after two separate reviews of his file, when a CRA official concluded that the taxpayer had “voluntarily” left his job and that his lack of work and subsequent drop in income were unrelated to COVID-19 . The CRA officer therefore concluded that the taxpayer was not eligible for the CRB.

The taxpayer appealed to the Federal Court to determine whether the CRA’s decision to deny him the CRB was “reasonable.”

Recall that the CRB was available to taxpayers in 2020 and through the end of 2021 if they were Canadian residents, were at least 15 years old, and had a valid Social Security Number. To receive the CRB, a taxpayer must have retired from work due to COVID-19 and be available and looking for work, but have experienced a reduction in income (self-employment) of at least 50 percent compared to their average weekly income in either the previous calendar year or the 12-month period prior to the application date. The taxpayer must not have voluntarily quit his job and must have had (self-employment) income of at least $5,000 in the preceding calendar year or 12-month period prior to the filing date.

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During several conversations with CRA agents, the concerned taxpayer mentioned several factors that explain his decision to stop working in March 2020. First, he stated that he had not worked since then due to a recovery period from surgery for cancer, as well as medical recommendations he had received that he had no direct contact with passengers. In a subsequent telephone conversation, the taxpayer explained that his work had been halted because many people were telecommuting and as a result did not take as many taxis anymore.

The CRA official responsible for the initial assessment concluded that the taxpayer was ineligible for the CRB because he voluntarily terminated his employment and chose not to work “for reasons other than COVID-19”. The officer concluded that the taxpayer could work, but was not actively looking for work.

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A second review was initiated by another CRA official. That officer also denied the taxpayer’s claim and found that, again, he did not meet the CRB criteria, as he was not working for reasons other than COVID-19. “The taxpayer has voluntarily (elected) to leave his employment in March 2020 without medical advice or discharge due to COVID-19,” the officer wrote. “His field of work (taxi) was certainly calmer during the pandemic, but the necessary measures had been taken to make (the drivers) the work as safe as possible.”

The central question to be answered in determining the eligibility of the CRB was whether the taxpayer was not employed during the various CRB periods for reasons related to COVID-19. The taxpayer explained that at the start of the pandemic, he decided to stay at home temporarily because he was concerned about the little-known risks of COVID-19, especially in light of his medical history. He also said that in March 2020 his intention was to return to work soon, but this was not possible as people were working from home and did not take taxis, so it was no longer profitable to hire a taxi to act as a driver. to work.

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The judge considers these statements highly relevant to determine whether the taxpayer was not at work in October 2020 for reasons related to COVID-19. If the state of the taxi industry at the time due to the pandemic in the taxpayer’s city was such that he would lose money if he worked, “it seems to me at least possible to conclude that he was not working for reasons that ‘related’ to COVID-19,” the judge wrote. “Under these circumstances, I find it difficult to accept that this decision was ‘voluntary’ and unrelated to COVID-19, even in the absence of medical advice.”

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The judge also noted that the rules do not require the “reasons related to COVID-19” to be medical reasons. The taxpayer said he could not earn an income as a taxi driver due to the impact of the pandemic on his field of work. The judge said it was up to the CRA agent to “make sense of this statement,” something he said it did not fully do. The judge therefore concluded that the CRA officer’s decision was unreasonable because it failed to properly address the central and relevant issues and concerns of the taxpayer.

Although the taxpayer itself requested the federal court to recognize its eligibility for the CRB retroactively from September 27, 2020 to October 23, 2021, the court’s jurisdiction was limited to merely determining whether the CRA’s decision was reasonable. As a result, the judge sent the case back to another CRA official for reassessment. The taxpayer was also assigned costs of $1,875.

Jamie Golombek, CPA, CA, CFP, CLU, TEP is the General Manager, Tax & Estate Planning at CIBC Private Wealth in Toronto. Jamie.Golombek@cibc.com

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This post Taxi driver takes over CRA over CRB eligibility and deserves another look was original published at “https://financialpost.com/personal-finance/taxes/taxi-driver-takes-on-the-cra-over-his-pandemic-benefit-eligibility-and-earns-another-look”

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