CRA Collection Powers
Debts Owed to the CRA Vs. Other Creditors
Owing a debt to the Canada Revenue Agency (“CRA“) is not like any other debt. Unlike other creditors, the CRA has powerful and broad powers under the law that it can use to collect its debt owed to it. In addition, the CRA’s Collections Department is incredibly aggressive in using these powers to collect its debts.
Specific Collection Powers of the CRA
The CRA has been given broad powers under the Income Tax Act and the Excise Tax Act to collect tax debts. These Acts empower collection officers employed by the CRA to, for example, seize money from bank accounts, garnish payroll cheques and seize and sell personal assets without a court order. The CRA also has the power to issue a “requirement to pay” to third parties. A requirement to pay is a legal notice to a third party who owes you money, instructing them to remit the funds owed to you directly to the CRA. The following are some of the broad powers accorded to the CRA under Canadian tax law:
- Bank Account Seizures
The CRA has the power to freeze your bank account and issue a requirement to pay to the bank to have them remit the funds in your account to the CRA without a court order. For example, if you owe a $50,000 debt to the CRA, a requirement to pay letter issued to the bank will ask that your current bank account balance and all future deposits be remitted to the CRA until the $50,000 debt has been paid in full.
- Wage Garnishment
The CRA is allowed to garnish up to 50% of your employment income and 100% of your other income (e.g. freelancing or contract works). The CRA can garnish your wages without a court order.
- Taking Money Owed To You By Other Government Programs
To collect its debt, the CRA can take the money owed to you by other government programs, such as childcare benefits or GST/HST credits.
- Seizing and Selling Your Assets
The CRA can seize property you own, such as your car, boat, rental property, and even your primary residence. Once the CRA seizes these assets, it can then have a court enforcement officer sell the assets and remit the proceeds to the CRA to pay off your debt. Any charges incurred by the CRA through this process will also be added to your outstanding debt with the CRA.
CRA Statute of Limitations
There is a collection limitation period referred to as a “CRA statute of limitations.” This statute of limitation is essentially the time limit in which the CRA can collect a tax debt owed to it by a taxpayer. Each tax debt has a six or ten-year collections limitation. The limitation period start date and its duration will differ depending on the type of tax debt owed. It is crucial to identify that there are several methods in which the CRA can “reset the clock” on these limitation periods. For this reason, you should be highly vigilant when dealing with the CRA regarding your tax debt.
Limits to CRA Collections Actions
While the CRA will normally not stop collections actions until the tax debt is paid in full, there are certain situations where the CRA may have to stop its collections actions.
- The Essentials Of Life
The CRA may be willing to stop the collections actions if you can prove that it is causing you serious financial harm. In addition, if the CRA’s collections actions have the effect of denying the essentials of life for your family, the CRA must also stop its collections actions. The essentials of life include, for example, food, clothing, and shelter.
- Creators Of High-Quality Employment
The CRA also has an informal policy of taking into account the effects of its collections actions on businesses that create high-quality employment in Canadian society.
Professional Legal Help With the CRA
If the CRA has taken collection action against you, it is essential to retain the help of professionals. Our lawyers will begin by carefully assessing your tax situation and determining your best course of action against the CRA. We will communicate and negotiate with the CRA on your behalf, represent you in court against the CRA, and ensure that your interests are protected.
—
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.
