I’m a victim of CERB fraud—years later, I’m still dealing with the tax implications

My excitement faded when I pulled the envelope from a wad of crumpled flyers and opened it. Inside was a T4A from the Canada Revenue Agency (CRA) indicating I’d received $8,000 in Canada Emergency Response Benefits (CERB) during the 2020 tax year.

It was July 2021. By then, I’d already come to accept that a 2019 data breach at Desjardins credit union, which resulted in my personal and financial information being leaked online along with that of 9.7 million others, would likely trail me for the rest of my life. But I’d hoped that if someone were to steal my identity, the hassles stemming from that would be more easily resolved. Turns out that was wishful thinking. 

By the time I purchased my house, I already spent a year dealing with a CERB fraud, whose origins might be linked to the data breach—I’ll never know for sure. After numerous calls and documents shared with the CRA, I was under the impression the situation had been fixed and my name cleared of any wrongdoing. Yet here I was, standing at the entrance of my new home, holding a tax slip I was sure would become the next chapter in my endless dealings with the government. 

If my experience has taught me anything, it’s that working through a tax discrepancy comes down to having a great deal of patience. Whether the discrepancy stems from financial fraud or human error, the process of informing the CRA should be relatively easy. What’s hard is following up until the problem is corrected. 

How I learned I was a victim of CERB fraud

My situation, while unique in some ways, is not that uncommon. The Canadian Anti-Fraud Centre (CAFC) received more than 24,700 reports of identity theft relating to CERB between March 6, 2020, and Aug. 31, 2021. It’s estimated that only a small percentage of fraud victims file a report, so the actual number is likely higher.

I’m one of the lucky ones—I detected the fraud the same day it happened. In July 2020, I received an automated email from the CRA, stating that my authorized tax representative had been changed. Later that day, I received a second email, this one confirming my decision to stop receiving email notifications for changes to my account. I’d made neither of these revisions. 

I logged into the CRA’s online portal, where I discovered that a fraudster had hacked into my account, changed my banking info and applied for CERB benefits in my name. The money was directed to a TD account I did not own. I gather the person disabled my email notifications to prevent me from finding out until tax season rolled around. 

I spoke to a representative of the CRA’s Canada Emergency Benefits Validation and Identity Protection Service, who assured me I would not be held responsible for the fraudulent benefits. She also said I might have acted soon enough to stop the money from even going through. My online account was temporarily deactivated to prevent further tampering. I was told the CRA would thoroughly investigate the incident; I should file a report with the local police department, and in the meantime, I didn’t have to worry about being taxed on CERB. 

I still had loose ends to tie up—more on these later. But in notifying the CRA as quickly as possible, I had taken the proper first step towards rectifying the fraud and clarifying my financial situation with the government.  

What if I hadn’t discovered the fraud early? 

I detected the crime early, but some victims of CERB fraud weren’t so lucky. Hugo Hamel-Perron, a teacher at Marianopolis College in Montreal, still doesn’t know when in 2020 he was targeted. When he received a T4A indicating $8,000 in CERB payments, he added it to a pile of tax documents for his accountant, without realizing what it meant. It was only when the accountant began preparing his return that he found out something was amiss.  

Not wanting to risk any irregularities in his 2020 filing, Hamel-Perron took the accountant’s advice and included the $8,000 in CERB as income. After all, he planned to request a tax reassessment and receive a refund at a later date. Before filing, he says, he spoke to a CRA representative, who confirmed this was the right course of action. 

He would soon come to regret this decision. At the time, Hamel-Perron was in the process of buying a condo with the federal government’s Home Buyers’ Plan, and he was expecting a hefty tax refund that year. Instead, he recalls being taxed at a rate of about 40% on the $8,000 in fraudulent benefits—around $3,200 in additional tax—which substantially reduced his refund.

“You need that money when you’re in the process of buying a house. So it really was a hassle,” Hamel-Perron says. “Some of the money I invested in RRSPs for that purpose—to go get that refund—I had borrowed.” With a smaller refund than he’d been expecting, he wasn’t able to repay the borrowed funds on time and ended up paying additional interest on them.  

What’s most frustrating for Hamel-Perron, however, is that he still hasn’t received a refund from the CRA. And this is after speaking to the agency several times, obtaining a corrected T4A and being reimbursed for the portion of the taxes paid to the Quebec government—which, he believes, was notified by the feds about the CERB correction. 

“You would get the impression that it’s basically solved, and that it’s just a matter of the bureaucracy handling things,” says Hamel-Perron. But it’s been months since he received the corrected T4A, and he still doesn’t know when he’ll get his refund. “I was letting it take its course,” he says. “But I’m thinking now that I’ll have to call [the CRA] back.”

The taxing part: Dealing with bureaucracy 

Unlike Hamel-Perron, I was instructed not to include the fraudulent CERB benefits in my 2020 tax filing. That means I haven’t had to back-track and chase money forked over to the CRA in goodwill. That isn’t to say it’s been smooth sailing for me. Over the last year and a half, many bureaucratic processes—combined with my own mistakes—have made an already stressful situation worse.  

During my initial calls with the CRA, I was asked to provide several documents to verify my identity and prove the fraudster’s TD account did not belong to me. The first part was easy. The second, not so much. 

As instructed by the CRA, I visited the nearest TD and requested a signed letter from branch management stating I was not a customer of the bank. It turns out the bank’s policies prohibit it from handing out customer information—even if you’re just trying to prove you’re not a customer. My request was denied. 

The CRA warned me this could happen. As an alternative, I had to provide the agency with the reference number of my police report, my banking information, my address and copies of two photo IDs. As instructed, I mailed the documents to a CRA office in Sudbury at the end of August 2020. I was told I’d get a call once they’d been reviewed. In October, I phoned back and learned the package was never processed—even though a Canada Post tracking number later revealed it arrived at the office on Sept. 1. To this day, as far as I know, the documents are considered lost. 

Moving on to plan B, I scanned and re-sent the documents by fax—a process that required subscribing to a specific app that cost me around $20.  

Finally, my documents were received and processed, and it seemed I was in the clear. I wasn’t. Later, I’d have to deal with reactivating my online CRA account—and, come tax time, with disabling a specific security setting within my account that prevented me from filing electronically. 

At every turn, I found myself calling the CRA. This is undoubtedly where many people get frustrated. After my initial call, I was given the direct phone number of someone at the validation and identity protection service. After she changed roles in October 2020, I was stuck with reaching the department through the automated phone directory, which takes upwards of three minutes—yes, I’ve tracked it. Wait times are punishingly long, especially during tax season. A few times, I’ve been on hold for close to two hours, and more than once, I was disconnected while waiting. The lines can get so busy that the system just boots you out—and that’s after you’ve listened attentively to its instructions (three minutes!) and punched in your SIN. 

Once you do get through, the CRA representatives try to be helpful, but it’s possible to receive inconsistent information, depending on who happens to be working that day. 

“At first, when I was given some good information, I just took it as true,” says Hamel-Perron. “And then sometimes I would call back, weeks later, and be given different information.” 

“You’re in this for the long haul”

It should come as no surprise, then, that I felt defeated when a government-issued T4A, for illegitimate income I had already worked for more than a year to clear from my file, appeared at my doorstep last July.

On the phone with the CRA shortly afterwards, I was told not to worry; the slip had evidently been issued in error. The person encouraged me to check back in a while to be sure it had been fixed. A follow-up call a month later left me exasperated. “You’re in this for the long haul,” this particular representative explained, when I asked, “How long?” As I write this, a T4A for 2020 CERB benefits continues to stare me in the face every time I log into my CRA account. 

My experience may lead you to believe fixing a tax discrepancy with the CRA is largely out of your control. But that’s not true. There are steps you can take to make your life easier, should you ever find yourself in a similar situation. 

Rebecca Hett, vice-president of tax, retirement and estate planning at CI Global Asset Management in Calgary, says I was right to contact the CRA early. There’s no advantage in waiting when it comes to raising an issue like tax fraud. 

As important as it is to act quickly, Hett cautions against making any hasty decisions. Before claiming income you never received, she recommends speaking directly with someone from the CRA. “It is always better to start with a phone call, because you do get real people on the other end of the line who are very reasonable,” she says. “And they appreciate it when a taxpayer is taking the initiative to resolve matters appropriately.” 

Then it’s a matter of following up. Unless otherwise directed by the CRA during your initial conversation, you should typically wait two to three weeks before calling back. Then, at that time, ask if submitting a letter would be appropriate, advises Hett. If so, it’s important to ask how it should be sent and to whom. Ideally, letters and supporting documents should be sent through your online CRA account, which houses a portal for submitting documents. Hett says this is the fastest and most accurate way to share information with the agency. It also guarantees you’ll receive a reference number you can use to track your request. 

After that, it’s a question of having “patience, patience, patience,” Hett says. Delays are likely, if not inevitable, when dealing with bureaucracy. But do yourself a favour and try to phone ahead of the busy January-to-April tax period—or expect your patience to be tested even more. 

I’ve also learned it helps to take detailed notes after every interaction with the CRA—and to review them regularly. The agency’s representatives are trained to document your calls, but you won’t have easy access to this information. And as time passes, it gets really easy to forget what’s happened. Reviewing my notes for this story, I found that, before she changed roles, my original CRA contact gave me a direct number for the validation and identity protection service, which would have spared me from calling the general CRA line. Why didn’t I use it? At some point, I simply forgot she’d given it to me. 

What to do when all else fails

If you aren’t able to have an issue like CERB fraud corrected before the tax deadline, it’s not necessarily wrong to take a conservative approach, like Hamel-Perron, and claim income you never received, according to Hett. However, that does mean you’ll have to ask the CRA to reassess your tax filing for the year in question, and that process can take months or even years, depending on the complexity of the review. 

“It’s not wrong to do that. But I think that’s being overly generous and cautious,” Hett says. “I would have taken a stand for the correct filing position right away, and then gone down that path. Because now it’s going to be a reassessment situation, and it will likely work itself out. But that taxpayer is out that money for all the weeks and months that it may take to get a reassessment.” 

That’s the situation Hamel-Perron says he finds himself in today. His tax reassessment is on hold pending the CRA’s investigation into the fraud. There’s no clear indication of how long that will take. 

My situation is less complicated. I’ve been told that Toronto police have closed my case and turned over all CERB-related fraud reports to the CRA. As far as I know, the agency’s investigation is ongoing. However, when it comes to my taxes, nearly all of the heavy lifting has been done. As Hett explains, a 2020 tax slip issued in 2021 still pertains to the 2020 tax year. Since I excluded CERB from my 2020 tax filing and have taken all the necessary steps to rectify the fraudulent income, I don’t need to worry unless the CRA initiates a new notice of assessment for that year. And if it comes to that—god forbid, but part of me expects it to—I can rest easy knowing there’s already a years-long paper trail to fall back on.

MORE ON TAXES:

• Personal Income Tax Guide: The deadline for filing your 2021 return, tax brackets and more
• What are you waiting for? Doing your taxes is easier than you think
• What can you claim on your income taxes: 7 deductions not to miss

• When are tax-deferred and tax-free accounts actually taxable?

About Justin Dallaire

Justin Dallaire is the senior editor at MoneySense.ca. He was previously an editor at Strategy magazine and has a master’s degree in journalism from Toronto Metropolitan University.

Linkedin Twitter