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Did someone forward you this email? Sign up to get Tax and Spend in your inbox.

Tax season kicks off on Monday, with the promise of an even more hectic few weeks than the normal frenzy.

The emergency pandemic benefits paid to millions of Canadians last year means that front-line staff at the Canada Revenue Agency will be fielding a much higher volume of inquiries than in previous tax seasons, Francesco Sorbara, Parliamentary Secretary to the Minister of National Revenue, said in an interview.

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The CRA has prepared for the expected crunch, including by adding a callback service, hiring 2,000 call-centre agents and using an outside company to answer some general queries that don’t require access to a taxpayer’s personal information.

And the flood of new online accounts in 2020 – in part, as Canadians opted for digital delivery of pandemic benefits – will help to ease any capacity issues. (Last year, 3.7 million taxpayers registered for an online CRA account, nearly triple the 1.3 million who did so in 2019.)

But there are still some bumps looming. The online accounts of 100,000 taxpayers were recently locked because of cybersecurity issues for accounts at third-party companies, unrelated to the CRA’s systems. (The worry was that compromised e-mail and password combinations might have been also used for CRA accounts.) Letters are being sent to those taxpayers, following up on a recent wave of e-mail notifications; access to the accounts can be restored once an affected individual calls the CRA.

But there is a possible Catch-22 situation for those whose mailing addresses are not up to date. They cannot use online services to update their addresses until they unlock their accounts. But the letter notifying them of the need to unlock their accounts would be sent to their old address. (However, address information can still be updated by telephone, or by snail mail.)


Taxing questions

A reader posted an interesting comment on last week’s Tax and Spend about Ottawa’s reversal of its stance that would have seen self-employed Canadians with gross, but not net, income above $5,000 to reimburse payments made under the Canada Emergency Response Benefit program. The issue, as the reader sees it, is a question of the fairness of the CERB program, which can pay out more than a recipient’s lost income.

It was certainly possible under the CERB to receive benefits that exceeded lost income under the CERB (and under the program that replaced it, the Canada Recovery Benefit, as well as under the amended structure of the Employment Insurance program). That’s a departure from how the EI program had worked, when it replaced only a percentage of lost wages, with a starting point of 55 per cent.

Under the CERB, applicants had to have had at least $5,000 in income. After deducting business expenses, net income for the self-employed could be much lower – in theory, nothing, though that would be unusual.

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Even for CERB recipients without business expenses, the math could be quite favourable. Applicants only had to attest that they had not been able to work for 14 consecutive days a four-week period. The number of hours that they had lost weren’t relevant, meaning a part-time minimum wage worker would receive the same $500 payment as any other person – replacing much more than their lost pay.

What’s more, recipients were allowed to earn up to $1,000 without reducing their CERB payment, although an additional dollar of earnings meant they had to forfeit their entire $2,000 benefit for the period. So, someone who had been earning $2,000 a month could legitimately claim the CERB, work a half-month for $1,000 in wages, and end up with $3,000 in income.

That’s not just history. Although the structure of the CRB is different, that program, too, has a $500 minimum weekly benefit that means that low-earning recipients can end up with higher incomes.

Have a Taxing Question? Send it to me here.


Line Item

Tax me, not: The Alberta budget lands on Thursday, promising to give some insight into how the province will cope with a catastrophic decline in natural resource revenue, especially, that has sent its deficit skyrocketing. The Business Council of Alberta, among others, has urged the province to introduce its own sales tax to boost revenue, a move that Premier Jason Kenney has dismissed. For more insight on that question, check out recent pieces by Globe columnists Gary Mason and David Parkinson.

If you liked this edition of the Tax and Spend newsletter, share it on LinkedIn or post it on Twitter.

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Follow me on Twitter, @PatrickBrethour or ask your Taxing Question here.

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