Applying through Multiple Platforms
An individual may also be flagged by the CRA if they have applied for the CERB benefit more than once through multiple platforms. Individuals may apply for CERB either through Service Canada or through the CRA website. Since all applications are automatically approved, it is possible for an individual to apply for the benefit from each platform and receive double the benefit amount. When this income is reported on the individual’s 2020 tax return, it is likely that the CRA will flag it as fraud.
The CRA may also flag an individual’s account if they did not earn a minimum of $5,000 through employment, self-employment income or maternity benefits in the preceding 12-month period. This means that an individual who was not working prior to the introduction of CERB, or an individual who only worked for a short period of time prior to the introduction of CERB, is not eligible. When such an individual reports the CERB income on their 2020 tax return, the CRA may look back at their previous tax return to verify the individual was eligible. If not enough, or the wrong type of income was filed in 2019, the CRA may flag the CERB application as fraudulent.
Making too Much Money
Finally, the CRA will likely flag an individual’s account if they earned too much income during the CERB period for which they applied. Since all income is reported on one’s income tax return, the CRA will have access to the amounts earned for any given CERB period. If an individual reports income totaling more than $1,000 monthly during any given CERB period, they will likely be flagged by the CRA.
Months after the first CERB payments were issued, reports of widespread fraud surfaced. It was estimated that tens of thousands of ineligible Canadians applied for and received the benefit either by intentionally committing fraud or as a result of a misunderstanding regarding eligibility.
Liberal Policy Response to CERB Fraud
Recently, the Liberal government introduced a draft bill that would have imposed sanctions on those found to have fraudulently collected the emergency benefit. Bill C-17, would have imposed criminal penalties on those who collected CERB but were not eligible. The bill suggested retroactive fines and up to six months in jail for those found guilty.
Shortly after being introduced, the bill was blocked by opposition parties who felt it was inappropriate to impose retroactive criminal sanctions. Instead, they argued, Canadian’s who received the benefit but were not eligible should voluntarily pay the money back to avoid future consequences. Within days of the legislation being introduced, approximately 190,000 Canadian’s had voluntarily repaid the benefit.
The Federal government has not yet introduced alternative legislation outlining penalties for those who have committed CERB fraud. Prime Minister Trudeau made a statement indicating that the government would not penalize those who made genuine mistakes. This statement tends to suggest that sanctions for those who intentionally defrauded the system could be introduced in the future. Those who received the benefit as a result of misunderstanding the eligibility requirements will be expected to pay the money back.
The Criminal Code and Fraud
Even without the introduction of new legislation, those who are found to have intentionally defrauded the system may be charged with fraud under section 380(1) of the Criminal Code. The Code states that an individual is guilty of fraud where they, by deceit, falsehood or fraudulent means, defrauds the public or any person of any property, money or valuable security or service. Those who have applied for and received CERB, knowing they were ineligible, have committed the offence of fraud.
Fraud offences are categorized based on the value of the fraud. Those who collected CERB benefits not exceeding $5,000 could be charged with fraud under $5,000. Those convicted of fraud under $5,000 will face a maximum of two years in prison, and/or a $5,000 fine. Those who collected CERB benefits exceeding $5,000 will be charged with fraud over $5,000. The maximum penalty for such an offence is fourteen years in prison. In addition to criminal sanctions, those convicted of defrauding the Canadian government may also receive additional fines or penalties.
CERB Snitch Line
To help catch fraudsters, the Federal government has implemented the CRA Leads Program, also known as the “snitch line”. The service allows Canadian’s to report those whom they believe are abusing the benefit. As of June 3, 2020, the CRA had received over 600 tips.