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The Canada Revenue Agency frequently tells Canadians who are struggling with government debt that they can ask for financial relief, but the agency applies such stringent and little-known criteria to evaluate who qualifies to pay less or repay over a longer period of time that many taxpayers find they are unable to access help.

The tax agency recently restarted withholding or reducing benefit payments to offset a taxpayer’s debt, a longstanding practice it paused during the pandemic to reduce financial stress on households. At the same time, it has encouraged Canadians struggling to repay the debt to reach out for help.

“We encourage all Canadians who are experiencing financial hardship and are affected by offsets to contact the CRA as soon as possible,” CRA spokesperson Sylvie Branch recently said via e-mail when discussing the resumption of federal child benefit clawbacks for households that had received overpayments.

But the CRA uses a statistical measure of low income to determine who may be eligible for financial relief that some policy experts say is excessively low and which may be excluding many Canadians who are facing financial hardship.

“Under a long-standing administrative policy, the CRA uses low-income cut-off (LICO) thresholds established by Statistics Canada as a baseline to establish financial hardship,” Paul Murphy, another CRA spokesperson, told the Globe in an e-mail discussing child benefit overpayments.

According to those thresholds, in a city of 500,000 people or more, for example, a family of four would need an after-tax income of less than $42,000 to qualify.

When an individual’s family net income is higher than the threshold, the taxpayer can ask to repay what they owe over a longer period of time if they don’t qualify for financial relief. But the CRA said for benefit overpayments it rarely stretches the timeline for recouping the debt beyond 12 months.

“Adjustments beyond 12 months are the exception and may be considered in extenuating circumstances for humanitarian reasons,” Mr. Murphy said.

Those criteria, which the agency did not communicate widely to the public, mean some families with modest incomes who face large debt repayments have been told they are not eligible for assistance.

In Toronto, Bridget Tougas, a recently separated mother of two, learned in February that she owes nearly $12,000 in federal and Ontario child benefits.

The overpayment stemmed from what Ms. Tougas described as unclear wording by the CRA about what constitutes having full custody of her children. The error led to a reassessment, meaning Ms. Tougas is now on the hook for the hefty overpayment. CRA is now withholding all of her child benefit payment of roughly $550 a month. Any income tax refund she might be entitled to this year will likely also go toward repaying her government debt.

When Ms. Tougas asked the CRA for financial relief through her MP, she learned her family of three would need a net income below $34,000 to qualify.

When she asked if CRA could recover the overpayments over a longer period of time, she was told that wasn’t possible either. Even with the agency withholding 100 per cent of her child benefits, it would take roughly two years for Ms. Tougas to offset her debt.

Without child benefits and the tax refund money she usually relies on, Ms. Tougas worries she won’t be able to continue to pay for speech therapy and other expensive supports for one of her children, who has severe disabilities.

“I said, can I pay $275 a month? They said no. And there was just literally nothing to do,” she said.

Jennifer Robson, an associate professor of management at Carleton University, called the income thresholds the CRA is relying on for financial hardship assessment “a really outdated metric of poverty and low income.”

Several policy experts and economists argue a more realistic gauge of poverty is the Market Basket Measure, which is based on the disposable income necessary to pay for a basket of goods and services linked to a modest standard of living. According to that measure, which was also devised by Statistics Canada, a family of two adults and two children in Toronto would need an annual disposal income of more than $51,350 to be above the poverty line, according to the latest available assessment, which dates back to 2021.

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