CRA Collections
When taxpayers fall behind on their tax obligations, the Canada Revenue Agency (CRA) has broad powers to collect outstanding amounts. Whether you are an individual or a business, understanding the CRA’s collection process is critical to protecting your financial interests and resolving tax debts effectively.
The CRA typically follows a structured process to recover outstanding tax debts. If you have an unpaid balance, the agency will first send a notice of assessment or reassessment, outlining the amount owed. If the balance remains unpaid, the CRA will issue collection letters, make phone calls, and escalate enforcement actions if necessary.
The CRA has a ten-year limitation period on collections in most cases, meaning it can enforce payment within six years of issuing a Notice of Assessment. However, this period will reset if the taxpayer acknowledges the debt, makes a partial payment, or CRA takes action of any kind to collect the debt.
CRA’s Collection Powers
The CRA has significant powers to collect tax debts, including:
- Garnishment of Wages and Bank Accounts: The CRA can issue a Requirement to Pay (RTP) to an employer or financial institution, requiring them to remit a portion of the taxpayer’s income or bank funds directly to the agency.
- Freezing Bank Accounts: In severe cases, the CRA may freeze a taxpayer’s bank account until arrangements are made to pay the debt.
- Seizing and Selling Assets: The CRA has the authority to register a lien against a taxpayer’s property and, if necessary, seize and sell assets to recover unpaid taxes.
- Offsetting Government Benefits and Refunds: Any government benefits, such as GST/HST credits or tax refunds, can be withheld and applied to outstanding tax debts.
Dealing with CRA Collections
If you are facing CRA collections, there are steps you can take to manage your situation effectively:
- Verify the Debt: Ensure that the CRA’s claim is accurate. Review your tax filings and confirm whether you owe the amount stated.
- Communicate with the CRA: Ignoring collection efforts can escalate enforcement actions. It’s best to engage with the CRA and discuss repayment options. Ignore CRA collections at your peril.
- Consider Payment Arrangements: The CRA may allow taxpayers to enter into a payment arrangement based on their financial circumstances. Interest will continue to accrue, but this can prevent harsher enforcement actions.
- Seek Professional Help: If you’re facing aggressive CRA collections, legal representation from an experienced Tax Lawyer can help protect your rights and negotiate more favorable terms.
When to Seek Legal Assistance
There are instances where taxpayers should seek legal assistance to handle CRA collections, such as:
- If the CRA has issued a garnishment or seized assets
- If you dispute the tax debt but are facing enforcement actions
- If you require negotiation of a payment plan with more manageable terms
- If you are at risk of bankruptcy due to tax debt
How SpenceDrake Tax Law Can Help
At SpenceDrake Tax Law, we assist individuals and businesses in dealing with CRA collections. Whether negotiating payment plans, disputing assessments, or preventing asset seizures, we provide strategic legal solutions to protect your interests. If you are struggling with CRA collections, contact us today for a consultation.
SpenceDrake Tax Law
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.