The Buzz

CRA: The CRA has resumed debt recovery activities; here’s how it may impact your benefit, credit, and refund payments

The Canada Revenue Agency has resumed its activities aimed at offsetting taxpayers' debt last October. Offsetting involves proactively applying tax refunds and benefit payments (such as the GST/HST credit) to tax and other government debts.

How offsetting works

Offsetting is a standard operating procedure that was used pre-pandemic by the CRA to collect outstanding taxpayer debt.

In May 2020, the CRA proactively paused most offset mechanisms in response to the COVID-19 pandemic. The pause was a temporary measure, like other COVID-19 relief tactics, to support taxpayers during a challenging time. 

Resumption of offsetting activities

Since October 2022, the CRA has resumed offsetting personal income tax refunds to recover outstanding debt from COVID-19 benefits. This decision was further reinforced by recommendations made two months later in the Auditor General of Canada’s 2022 Reports 9 and 10: Specific COVID-19 benefits, tabled in December 2022.

With the recent launch of the annual tax-filing season on February 20, 2023, a greater number of tax refunds could be subject to this practice. These deductions could apply, in particular, to debts related to COVID-19 benefits.

How payments are applied to offset debt

It’s important to note that, unlike other benefits, the Canada child benefit (CCB) payment can only be used to offset a CCB debt. Other types of child benefit payments can only be used to offset a debt related to the same benefit. To learn more about how government payments can be applied to specific debts, visit canada.ca/balance-owing.

Cases of financial hardship

Although the CRA is responsible for collecting debt from taxpayers, it understands that there are still individuals and families experiencing significant financial difficulties. Offsets may impact some individuals who have already established a payment plan with the CRA. Anyone who is experiencing financial hardship is encouraged to contact the CRA immediately to discuss their options. 

How to avoid incurring a debt in the future

Government debt can result from a change in eligibility for benefits and credits, or an overpayment. The easiest way to avoid incurring a debt is to let CRA know as soon as possible when your situation changes as you may no longer be eligible for certain benefits or credits.