CRA Jeopardy Orders

CRA Collection Powers 

Pursuant to section 225.1 of the Income Tax Act (“ITA“), the Canada Revenue Agency (“CRA“) can only begin taking action to collect taxes owed to it (including interest and penalties) after 90 days of sending a Notice of Assessment to the taxpayer. In situations where a taxpayer files a Notice of Objection or appeals to the Tax Court of Canada (or higher courts), the CRA is not allowed to start collections action until the appeal has concluded. In addition, if a taxpayer has already made payments to the CRA regarding amounts in dispute, the taxpayer is entitled to receive a refund from the CRA until the appeal has concluded.

CRA “Jeopardy Orders” or “Collections Orders”

However, in cases where the CRA has reasonable grounds to believe that a delay in collections will jeopardize the collection of some or all of the amounts owed to it, it can apply to the Federal Court of Canada or a superior court of a province for approval of the collection of the taxes before the outcome of an appeal. This power is given to the CRA under section 225.2 of the ITA. In addition, if the CRA has reasonable grounds to believe that receipt of a Notice of Assessment will likely jeopardize collections, it can apply for judicial authorization to collect the taxes before even sending a Notice of Assessment to the taxpayer.

The court will hear the application by the CRA on an ex parte basis. The term ex parte means that the court hears the application without notice and without the presence of other parties affected by the proceeding. With regards to an application under 225.2 of the ITA, this means that no notice from the CRA to the taxpayer is required and that the court will hear the CRA’s application for a collections order without the presence of the taxpayer.

For the CRA to receive judicial authorization under section 225.2 of the ITA, it must satisfy the court that there are reasonable grounds to believe that a delay would jeopardize the collection of the taxes owed. The CRA must serve the taxpayer with the “jeopardy order” within 72 hours of receiving judicial authorization unless the court issuing the order gives the CRA more time to serve the taxpayer.

Challenging a Jeopardy Order

If the court grants judicial authorization to the CRA to collect the taxes before the outcome of the appeal, a review procedure is available to the taxpayer. The taxpayer can have the “collections order” set aside or varied in particular circumstances. In challenging a jeopardy order, the taxpayer must show reasonable doubt that the delay would prejudice the collection of the amount in dispute.

The taxpayer must challenge the order within 30 days of being served with the order or within the time frame specified by the judge in the order. The taxpayer is also required to provide the CRA with at least one week’s notice that they will be asking the court for a review of the jeopardy order.

During the period that the Jeopardy order is under review by the court, the jeopardy order will remain in effect, and the CRA can proceed with the collection of the debt. Upon review of the jeopardy order, the court has the power to confirm, set aside, or modify the jeopardy order. Once the court has completed the review, there are no further reviews or appeals of the jeopardy order allowed by the taxpayer or the CRA.

Professional Legal Help With the CRA 

Contact our law firm immediately if you have received a Jeopardy Order. You must challenge the order within 30 days of being served (or within the time frame specified in the order), so you must act fast to challenge the order. Our firm can represent you against the CRA and advise you on how to tackle your tax situation.

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By Kaveh Rezaei – Attorney at KR Law Firm

**Disclaimer 

This article contains information of a general nature only and does not constitute legal advice. All legal matters have their own specific and unique facts and will differ from each other. If you have a specific legal question, it may be appropriate to seek the services of a lawyer.