TAX OVERPAYMENTS
By Teresa Williams
The Northumberland Community Legal Centre is one of 72 community legal clinics in Ontario that are funded by Legal Aid Ontario. We provide legal advice and information for residents of Northumberland County and represent financially eligible residents in the areas of law we practice.
Each year we review our data to determine which legal issues are on the rise, affecting more and more people. We have received questions in the past about appealing tax debts assessed by the Canada Revenue Agency (CRA). However, in the last six months or more, the Legal Centre has seen a large increase in the number of inquiries about tax appeal rights.
Taxpayers come to our office seeking answers, but we may not be able to get their problem resolved quickly, or at all. For most taxpayers, understanding and exercising appeal rights in regards to a tax debt are challenging.
The first part of the tax debt problem is that taxpayers might receive 2 different letters from 2 different agencies in regards to a tax debt. There could be one letter by one agency (eg. Service Canada) dealing with being ineligible for a certain benefit. For example, some of the reasons for being found to be not eligible for CERB (which will then result in the creation of an overpayment) include:
- Not meeting the $5,000 income threshold
- Reduction/loss of income was not related to COVID-19
- There was no 50% reduction in income.
Usually, though, it is the CRA that sends a letter stating how much is owing as a result of the ineligibility – that is the overpayment letter. Taxpayers who received CERB (Community Emergency Response Benefits) payments beginning in 2020, and who have since been found to be ineligible, are just now receiving overpayment decisions from the CRA.
The second part is, to further complicate matters, there are different processes for different overpayments, such as CERB, CRB, child tax benefits, disability tax benefits, etc. The Legal Centre can assist taxpayers to understand where their overpayments have come from, and what route to follow to object.
The third part of the tax debt problem is that Taxpayers can sometimes miss deadlines to take action and thus lose rights. In some cases, taxpayers spend a long time trying to resolve the issue to reverse any overpayment decisions. From the date of some overpayment decisions, taxpayers have 90 days to file an Objection form. Once they realize the overpayment remains, it can then be too late to file the Objection.
For instance, Taxpayers follow up with the CRA to try to determine why the debt was assessed, sometimes for months. The CRA representatives might advise taxpayers about missing documents or information that led to the decision. This can the taxpayer to believe that, if they provide the required information, a new decision reversing the overpayment will be made. In many cases, this does not happen, and it can then be too late to file the Objection.
It is our recommendation that taxpayers continue to provide further information requested by the CRA in hopes of resolving their issue. However, it is vital to keep the deadline in mind to file a T400A Notice of Objection – Income Tax Act. The Notice of Objection must be filed to the CRA within 90 days of the date of the overpayment decision to preserve your rights.
As long as a taxpayer has an overpayment with the CRA, that individual’s tax benefits will be applied to their tax debt until it has been paid. This may include deductions from child and family benefits, Old Age Security benefits and the Guaranteed Income Supplement, recovery of tax refunds and GST/HST rebates, among others.
We also encourage taxpayers to contact their local Members of Parliament to describe the tax problems.
In the meantime, the Legal Centre is working on a project to reform the way individuals have access to justice regarding their tax appeals. We look forward to sharing more.
Teresa Williams has been a community legal worker at the Northumberland Community Legal Centre (off and on) for 20 years.
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