Canada Revenue Agency (CRA) has specific guidelines and periods regarding the collection of outstanding tax debts.
Assessment and Notification:
After filing a tax return, the CRA assesses the return and issues a Notice of Assessment or Reassessment if there are any changes. Taxpayers are notified of any amounts owed, including penalties and interest.
Payment Due Date:
Typically, for individuals, any tax balance due is payable by April 30 of the year following the tax year. For instance, your 2024 personal tax return is due April 30, 2025 and payment is due the same date. Interest accrues on any outstanding balance.
Grace Period:
If a taxpayer does not pay the amount owing by the due date, the CRA generally provides a brief grace period during which the taxpayer can make the payment without facing immediate collection actions.
A taxpayer has 90 days (plus 1 year with an extension request) from the Assessment or Reassessment date to file a Notice of Objection to appeal. CRA will normally refrain from collections actions such as bank account garnishment within this initial 90 day period. However, you may receive collection notices.
Collection Actions
Initial Collections:
If payment is not received, the CRA will send reminder letters and notices. These are often sent within a few weeks after the due date.
Collection Calls:
If the debt remains unpaid, CRA collectors may contact the taxpayer via phone to discuss payment arrangements.
Collection Notices:
Further collection notices may be issued if the debt continues to remain unpaid, detailing the outstanding amounts and any accrued interest or penalties.
Payment Plan:
Taxpayers have the option to arrange a payment plan with the CRA. If the collector does not mention it the taxpayer should, and also ask for an income and expense statement (individual) or financial statement (business/corporation) to be completed by the taxpayer to determine the ability to pay. If the collector ignores the request ask to speak to a team leader.
Interest and Penalties:
Unpaid taxes accrue interest and may incur penalties, increasing the total amount owed.
Enforcement Actions:
If taxes remain unpaid, the CRA can take various enforcement actions, such as garnishing wages, freezing bank accounts, or placing liens on properties. CRA has enormous collection powers which should not be underestimated or ignored. We routinely hear from taxpayers who did just that and, for example, CRA has garnished a bank account disabling business operations and the ability to make payroll.
It is important to communicate with CRA about your tax debt, to make any payments you can, no matter the amount, and work out a payment plan with the collector. Again ask for an income and expense or financial statement to be completed by you to determine the ability to pay. Cooperation results in much better outcomes but don’t expect consistent treatment among collectors.
Taxpayer Rights:
Taxpayers have rights during the collections process, including the right to appeal decisions and the right to fair treatment. However, some CRA collectors can be very aggressive and will disregard the Taxpayer Bill of Rights. Ask to speak to a Team Leader if you believe you are being treated unfairly.
At SpenceDrake Tax Law, our Tax Lawyers assist individuals and businesses with managing CRA collections. If you require assistance contact us for a consultation.
SpenceDrake Tax Lawyers
Disclaimer
Each article/blog post is only meant to provide general information. It is posted on a specific date. Laws and rules change. Please know that it may be out of date. It is not meant to provide legal advice, and it does not provide legal advice. It cannot be relied on. Every tax situation is unique, and that may mean situations differ from this article/blog. If you have legal questions, please consult a lawyer.