I recently had the privilege of speaking to a CRA tax collector. Although I do not recommend carrying an outstanding debt with CRA, here is some very important information if you were to run into this situation.
If you had to rank the programs in order of importance, what would they be?
Whereas every account type is important and carries its own particular responsibilities, trust accounts are of particular importance. Trust accounts, specifically GST/HST and payroll, are those, as the name suggests, held in trust for the Government as required by the relevant sections of the Income Tax Act and Excise Tax Act and ought not be used by a business for any purpose other than the being remitted in full by the proper due date. One can think of trust accounts as funds which, although held by the business until the proper remitting date, perhaps in a bank account, never belonged to the business itself. If a business were to use trust funds for business purposes, or otherwise, and not be able to pay in full by the appropriate due date then the business is in breach of their responsibilities under the Acts which regularly leads to legal action by the Canada Revenue Agency to collect the unpaid trust amounts. Legal action may include, but is not limited to, garnishment of bank accounts and accounts receivable, seizure of assets, and liens against real/personal property. Further, failure to remit trust accounts in full results in significant penalty, interest, and personal liability of director(s) if left unpaid.
What are the most common terms negotiated with CRA for outstanding balances?
The taxpayer is not inherently entitled to negotiate the terms of a payment arrangement by virtue of being indebted to the Canada Revenue Agency. In certain circumstances a payment arrangement may be approved by the Agency, but it should be noted that the Agency is not bound to do so and may reject such a request for several reasons. A monthly arrangement may be entered into with an authorized officer – the taxpayer may not simply send in post-dated cheques in arbitrarily determined amounts. Further, payment arrangements are intended to be as expedient as possible and require remaining filed up-to-date and current on payments. If an arrangement is permitted, based on several criteria, the monthly amount payable and number of months will generally be based on taxpayer’s ability to pay which normally requires substantiation, including bank records and otherwise, on an ongoing basis subject to re-evaluation. When discussing a payment arrangement, the taxpayer will not be able to negotiate a general decrease in a balance or the waiving of penalty and/or interest.
If someone were to ignore a CRA Collections Officer, what typically happens?
When a balance enters collections, the Agency attempts to notify the taxpayer of the collectible amount. Notification of a balance may occur by letter mail, such as a Notice of Assessment, or telephone contact, assuming the taxpayer has provided the Agency with their most recent contact information. If the taxpayer fails to resolve the balance with the Canada Revenue Agency Collections Officer, then the Agency may consider legal action to collect the outstanding balance. As mentioned above, most commonly this includes issuing garnishment and securing debts against property until paid in full.
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