The Power and Limits of CRA Collections
The Income Tax Act grants extensive powers to the Canada Revenue Agency (CRA). The CRA is not your average creditor; they have a variety of tools for collections and their powers are broader. Therefore, if you owe the CRA money, it is important to know the limits of the CRA’s power so you can deal with collections in the most effective way.
90 Day Window
The CRA typically grants a taxpayer a period of 90 days to make good on any debt stemming from an assessment before forwarding the case to a collections officer. This 90-day grace period is enshrined in the Income Tax Act. However, this only applies to debts under the Income Tax Act. If a taxpayer owes GST/HST or source deductions, the 90 days does not apply.
Initial Collections Activity
At this stage, the CRA will initiate phone calls to the taxpayer in an attempt to collect on money owed. These phone calls can often be intimidating as collection officers will often threaten legal action. Further, if the phone calls become ineffective, collections may escalate their efforts by making in-person visits to taxpayer’s homes or registered offices. It is essential for taxpayers to know that they are not required to speak to the CRA directly. According to section 15 of the Taxpayer’s Bill of Rights, taxpayers “have the right to be represented by a person of your choice.” In these types of cases, taxpayers should seek advice from experienced tax experts.
CRA Payment Arrangements
Taxpayers may attempt to get themselves on payment arrangements by negotiating with their collections officers. However, communicating with the CRA can create undue stress. This is just one of the many reasons it is useful to have experienced tax professionals negotiate with the CRA collections officers of your behalf. Tax professionals have a deep understanding of the Income Tax Act and can advocate for a payment arrangement between the CRA and the taxpayer to avoid undue hardship to the taxpayer. While the CRA would rather get paid on time, its ultimate goal is to collect the amount owed. A payment arrangement allows the taxpayer to pay smaller payments, that are affordable based on your financial situation, overtime, until the entire debt is paid off.
CRA Legal Action
If initial collections efforts are ineffective, the CRA has the authority to take legal action against a taxpayer. The CRA does not need to sue the delinquent taxpayer in order to obtain a judgement to garnish wages. This means that the CRA can issue a Requirement to Pay (RTP) to garnish your wages. At this stage, you still have the ability to communicate with your collections officer to attempt to arrange a payment plan that may reduce or remove the garnishment. Your employer is required to pay or will be held liable for amounts not remitted.
The Income Tax Act also gives CRA collections officers the ability to seize bank accounts, RRSP accounts, accounts receivables, put a lien on a taxpayer’s property, including motor vehicles, and forcing the sale of your home. Seizure and lien action can derail the life of the taxpayer and cause undue hardship. If you are currently dealing with a debt that is being enforced, we can help you better understand the various solutions.
Dealing with the CRA collections department can be overwhelming and stressful. If you are having trouble with the CRA, give our team a call to ensure you have the right advice and effective representation. We’re here to help!
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.