CRA Collections and COVID-19
Given the unprecedented financial turmoil facing Canadians as a result of the COVID-19 Pandemic, on March 20th 2020, the government of Canada announced a suspension of collection activities and the removal of certain legal action. The following will detail how the suspension of these activities will affect taxpayers, and the proactive ways in which Canadians can benefit.
Suspension of CRA Collections Activity
The Canada Revenue Agency has suspended debt collection due to the fallout from the COVID-19 outbreak.
The CRA has stopped collection on new debts “until further notice,” and said it will allow flexible payment arrangements. As per pre-existing debt obligations, the CRA has stated that collections staff will address pre-existing situations on a case-by-case basis to prevent financial hardship. For general information on the power and limits of the CRA collections, see our blog here.
The CRA has also stated that taxpayers prevented from making payments, filing returns on time, or complying with other tax obligations due to circumstances beyond their control “can submit a request to cancel penalties and interest.” This can be done via an application for Taxpayer Relief under the IC07-1R1 Taxpayer Relief Provisions. For more information on these provisions, and the CRA’s guidelines surrounding what constitutes Taxpayer Relief, see our blog on Taxpayer Relief found here.
With regards to payment plans, the CRA has arranged for payment plans to be available on a case by case basis in relation to the inability to pay taxes, child and family benefit overpayments, Canada Student Loans, or other government program overpayments in full. The Federal Government has already pushed back the income tax filing date to June 1, and has allowed taxpayers who pay by instalments to delay their payments.
CRA Collections and COVID-19 – What Happens Next?
Canadian taxpayers have been given the unique opportunity to take proactive action and benefit from the suspension of CRA Collection’s activities. CRA Collections will be under tremendous pressure once the Pandemic has passed. There will be hundreds of thousands if not millions of Canadians who are now unable to pay their taxes. CRA Collections will have its hands full, to say the least.
That is why being proactive matters so much at this point in time. Here at Rosen Kirshen Tax Law, we are assisting our clients with working out a plan for repayment once CRA collections resumes regular operations. By having a plan of action ready, CRA collections will be much more willing to work with us and the taxpayer. The reason for this is because they will have a lot of files in their inventory, so if they can make a deal and move on, we think they will do so.
Ignoring your debt does not make it go away, even as CRA actions are suspended. In fact, it has never been more prudent to manage your affairs appropriately. It is very important that taxpayers act quickly and avoid long term financial or legal consequences which may arise when the CRA reintroduces debt collections.
Once the CRA reactivates debt collections, they will also begin charging interest compounded daily at the prescribed rate on any amount owing – until your balance is paid in full. Taking the time now to properly address your debt amount will avoid the accumulation of interest once the CRA’s pandemic protocol comes to an end. As well, properly organizing your financial affairs now, for future negotiations, will allow for a seamless process to ensure that no legal action is taken, or reinstated, once the CRA resumes their normal functions.
At Rosen Kirshen Tax Law, we have both lawyers and paralegals with years of experience negotiating directly with the CRA to resolve your tax debt and mitigate the legal consequences which may occur once CRA Collections is operating. If you have any questions about how the changes to CRA may affect you as a taxpayer, or questions about dealing with CRA Collections, please contact our firm for a free consultation.
In the meantime, we will continue to keep you informed and hope you and your families remain safe and healthy in these uncertain times.
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.