CRA says T4 slips insufficient proof of income for CRB eligibility and judge agrees

National Post


As the government continues to audit taxpayers who received COVID-19-related benefits under the various relief programs offered during the pandemic, a recurring issue in most of the cases that have reached the courts is the inability of benefit recipients to demonstrate proof of prior-period income.

One of the criteria to be eligible for the Canada Recovery Benefit (CRB) is the applicant must have earned at least $5,000 of employment or self-employment income in 2019, 2020 or the 12 months preceding a CRB application.

The issue in the most recent reported case, decided in late October 2022, was whether a T4 and T4A slip totalling at least $5,000 were, absent any other documentation, sufficient proof to demonstrate the requisite income to qualify for the CRB.

The case involved a taxpayer in British Columbia who applied for the CRB in October 2020. In a letter dated July 19, 2021, the Canada Revenue Agency, which administers the CRB, said the taxpayer didn’t qualify for the CRB because he had not earned at least $5,000 of employment or self-employment income in 2019, 2020 or the 12 months preceding his application.

The taxpayer wrote to the CRA requesting his file be reviewed by a second CRA officer. This second-level review was conducted, but, unfortunately, the conclusion was the same with the officer finding the taxpayer wasn’t eligible for the CRB due to insufficient income. The taxpayer then appealed this decision to the Federal Court.

As in prior such cases, the court’s role is not to substitute its decision for that of the CRA officer, but rather to determine whether the CRA’s decision was “reasonable” considering the facts and evidence. A reasonable decision is “one based on an internally coherent and rational chain of analysis that is justified, transparent and intelligible in relation to the applicable factual and legal constraints.”

In this case, the taxpayer didn’t just want the matter sent back to the CRA, but wanted the court to give the CRA specific “direction to find that the (he) did earn at least $5,000 in 2019.” He also sought costs.

To support the taxpayer’s eligibility for the CRB, he submitted T4 and T4A slips for the 2019 taxation year to show he had earned at least $5,000 in income. As the taxpayer stated, these slips “are legal documents issued by a third party,” and such should be “conclusive third-party verification” of his income.

He maintained these slips should be enough to prove his 2019 income and the CRA “need not go further to verify his eligibility.” In addition, he argued that since the CRA issued him a 2019 Notice of Assessment based on his filed 2019 tax return with the T4 and T4A income on it, that means the CRA must have “accepted his declaration of employment and self-employment income.”

The judge didn’t agree, pointing out the Canada Recovery Benefits Act states a CRB applicant must provide the CRA with any information the CRA requires in respect of the application. “The CRB Act empowers the CRA to request information from an applicant, and the obligation is on the applicant to provide the information as requested,” the judge said.

The judge, citing a prior CRB case, referred to the CRA Guidelines on the types of documentation required to establish the $5,000 minimum income. According to these guidelines, acceptable proof can consist of pay slips, employment verification letters, records of employment, bank statements showing the name, address and payroll deposit, and other documentation.

As for proof of self-employment income, the CRA Guidelines provide several examples of what constitutes acceptable proof, including invoices to clients showing the date of the service, the name of the client, the cost of the service and the type of payment received.

The taxpayer, however, refused to share any of the above information with the CRA, insisting that all the above information, including his bank records, were “confidential.”

As a result of the limited evidence presented, the judge was unwilling to direct the CRA to find that the taxpayer earned at least $5,000 and was thus eligible for the CRB. “The applicant has not satisfied me why his case would be one of the ‘limited scenarios’ for the court to substitute its own decision rather than remitting the matter (back) to the (CRA),” the judge wrote.

The judge did agree to send the matter back to the CRA for reconsideration by a different officer. In so doing, however, she encouraged the CRA to provide an opportunity for the taxpayer to make further submissions and to provide additional documentation beyond his T4 and T4A slips to substantiate the $5,000 of 2019 income.

As to whether to or not to award the self-represented taxpayer costs, which the court has full discretion to do, the judge concluded this was not a case that warranted such an award, since the taxpayer did not demonstrate “that he incurred an opportunity cost by foregoing remunerative activity in preparing for this case.”