Pandemic Benefit Repayment Demand Cut From $12,800 to $4,100

The situation

David worked as a line cook at a restaurant in Chatham, and his husband Andriy worked as a transit operator. They owned their home, which included a legal secondary unit they rented out for extra income on top of their two paycheques. Their son Taras, in his early twenties, lived in that unit and worked part-time while he figured out what came next. The arrangement suited everyone — a below-market rent for Taras, and a modest but steady stream of rental income for his parents that helped cover the mortgage.

Through 2020 and into 2021, all three had stretches where their income dropped because of pandemic closures and reduced schedules. David's shifts were cut when the restaurant scaled back seating and, later, when it closed its dining room altogether for a period. Andriy kept his job but had fewer routes and fewer hours for months at a time as service was scaled back. Taras, working part-time retail and picking up occasional gig work, had his hours cut too, and spent part of that stretch relying on the reduced income while he searched for something steadier. Each of them applied for the Canada Recovery Benefit, a federal income-support payment for workers whose income fell because of COVID-19, for the periods that applied to their own circumstances. None of the three coordinated with each other beyond a shared understanding that money was tight for a while.

Almost two years later, three separate letters arrived at the same address — one for David, one for Andriy, one for Taras — each saying the Canada Revenue Agency could not confirm eligibility for several of the periods claimed and demanding repayment. Combined, the three letters asked for $12,800. It was a real amount for a household that had been getting by on a line cook's wages, a transit operator's shift pay and a young adult's part-time hours. The family came to Treadstone Law unsure whether to respond individually or together, and genuinely worried that having three linked files at one address would somehow make the whole thing look worse than it actually was, rather than better.

What the review found

The Canada Recovery Benefit had two eligibility conditions that mattered here. First, an applicant needed at least $5,000 in net income from employment or self-employment in the prior twelve months. Second, for each two-week period claimed, the applicant needed to show that their employment or self-employment income had dropped by at least half compared to before the pandemic, for reasons related to COVID-19, and that they were not collecting Employment Insurance for the same period. The benefit was paid first and verified afterward, so a wave of post-payment reviews went out once the program wound down.

Reading the CRA letters closely, a pattern emerged. The agency's review had pulled income figures from David and Andriy's tax filings that included the net income from their rental unit alongside their employment income. Rental income is property income, not employment or self-employment income, and it does not count toward the Canada Recovery Benefit's income or reduction tests. Blended together, though, it made their year-over-year income look more stable than it actually was, which was why the reviewer could not see the drop in employment income that had actually happened.

Taras's file raised a different question. It was his first year with meaningful income, split between a part-time retail job and occasional gig work, and the agency's reviewer could not confirm from his tax slips alone that he had crossed the $5,000 threshold at all, let alone shown a qualifying drop for each period claimed. A T4 slip from a single part-time employer told only part of the story, and gig-work income reported through a platform does not always generate a slip CRA can match automatically to a specific applicant, so the file looked, on paper, like a young worker with too little documented income to qualify — even though the money had genuinely been earned and the drop had genuinely happened.

What we did

1. Treated the three files as connected but separate. The shared address meant the review had linked David, Andriy and Taras's files together, but each person's eligibility depended on their own income and their own circumstances, not on the household as a unit. We prepared three separate, consistent responses rather than one joint submission, so a weak point in Taras's file could not be read across into his parents' stronger ones, and so the reviewer could evaluate each claim on its own record instead of treating the address as a single case.
2. Separated rental income from employment income. We pulled together the lease agreement for the secondary unit, the rental ledger showing monthly payments, and David and Andriy's pay records, and set out plainly which figures belonged to which income source. Once the rental income was pulled out of the calculation, the drop in their employment income for most of the periods claimed became clear.
3. Gathered proof of the reduction itself, not just the pay stubs. A pay stub shows what someone earned; it does not on its own show why. We obtained records of employment and a letter from David's employer confirming reduced seating capacity and cut shifts, and route and scheduling records from Andriy's employer confirming reduced service hours during the periods in question.
4. Reconstructed Taras's income from bank records. With no single employer able to confirm the full picture, we assembled his pay records and gig-work deposits over the twelve months before his first claim, matched each deposit to a pay period, and built a simple running total to show, period by period, that his combined income crossed the required threshold well before he ever applied. That running total also let us point to the specific weeks where his hours were cut, rather than asking the reviewer to take the overall drop on faith.
5. Conceded the periods the records did not support. A handful of periods for each of the three had thin or missing documentation — a stretch where Taras's gig income wasn't tracked closely, a short period where David's schedule had already partly recovered. Rather than fight every dollar and risk the agency's goodwill on the strong periods, we flagged these early, in writing, as ones the family was prepared to repay, which let the reviewer spend their time verifying the periods that had real supporting evidence instead of wading through weak ones alongside them.

The outcome

The Canada Revenue Agency accepted the reconstructed documentation for most of the periods across all three files. David's original demand of about $4,600 was reduced to about $1,300. Andriy's demand of about $4,100 was reduced to about $1,300. Taras's demand of about $4,100 was reduced to about $1,500. In total, roughly $8,700 of the original $12,800 demand was reversed, leaving the family owing about $4,100 combined, which they arranged to pay off over several months rather than in one lump sum.

It was not a clean win. The periods where the family's own records were thin stayed on the books, and no amount of after-the-fact reconstruction was going to change that. But separating the rental income from the employment income turned what looked like three weak files into two solid ones and one partial one, and that distinction was the difference between owing $12,800 and owing $4,100.

The family also came away with a clearer sense of how to avoid the same problem next time. David and Andriy now keep the rental ledger and their pay records in separate folders rather than handing their accountant one combined bank statement, and Taras has started keeping a simple log of his gig-work shifts and deposits as he goes, rather than trying to reconstruct a year of casual income from memory after the fact. None of that guarantees a future review would go smoothly, but it means the raw material for one would already exist.

What you can learn from this