How To Deal With CRA Collections

CRA Collections has very strong and very broad powers to collect money owed to them? CRA Collection powers include garnishing wages, freezing bank accounts, issuing liens and more. There are ways to deal with CRA collections. Often, its better to seek the help of a professional tax dispute expert such as Farber Tax.

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How the CRA Collects Tax Debt


If you owe money to the Canada Revenue Agency (CRA) you might think that this debt is just like any other debt. Unfortunately, this is not true. Unlike other creditors, the CRA has very strong and very broad powers that it can use to collect tax debt.

The CRA has strong powers, and their Collections Department is especially aggressive in using them. Communicating with the CRA can be frustrating and time-consuming in the best of times, but if you owe money, the situation gets worse. While other creditors may be willing to accept a lower amount rather than risk you defaulting on the loan, the CRA is empowered by laws to collect on your debt. This mean that they will negotiate differently than any other creditor you might have. Most likely, the CRA will be much more aggressive when it comes to working out a payment plan.

The CRA often requires significant financial disclosure if you are looking to pay your tax in instalments. This can make working out CRA payment plans quite difficult. Once the agency knows how much you earn and spend each month, it could demand a lot from you. For instance, the CRA may think that you are paying “too much” on your other debts, and demand that you make only the minimum payments, so you can give more to the CRA. This can get you into trouble however, as making only minimum payments can be very costly as you’ll pay a lot in interest.

The same is true for paying corporate tax in instalments. The CRA will be very aggressive and difficult to deal with.

When it comes to how to deal with CRA collections and negotiations, it’s best to have a trusted and experienced professional on your side. Our team is made up of ex-CRA, accounting, and legal experts who know what it takes to work with the CRA effectively and resolve your tax situation. Contact us today to find out more. We frequently hear from individuals with CRA collection complaints and we know how to deal with CRA collections.


How CRA Collections Works


There are many ways that the CRA can act to collect debt that is owed to it, including:


  • Wage garnishment
    • The CRA is legally allowed to garnish up to 50% of your employment income (and 100% of other income) if you do not pay your tax debt. Of course, this can be a very difficult situation to deal with. Most people would not be able to afford their monthly expenses if they suddenly lost 50% of their income.


  • Using money owed to you by another government agency
    • The CRA can take money that is owed to you by other government programs, such as GST/HST credits and childcare benefits, and apply these funds towards your outstanding debt.


  • Freezing your bank accounts
    • The CRA can freeze your bank account and then, after a period of time, the bank will be required to forward your money directly to the CRA. Obviously, if your bank account is frozen, this will make it incredibly difficult to receive income and to pay bills and expenses.


  • Seizing and selling your assets
    • The CRA can seize property that you own, such as your car, your rental property, and even your primary residence. The CRA can then have these assets sold by a court enforcement officer and will use the proceeds to pay off your debt. If this situation occurs, you will have to pay the costs and charges occurred by the CRA for this process.


  • Holding a third party responsible
    • The CRA can hold a third party responsible for your debt, including a business partner or related corporation.


It’s important to note that, if the CRA takes any of these actions and you still have outstanding debt (for example, if the money taken from your bank account or generated by selling your assets isn’t enough to pay your debt in full) you will still owe the outstanding debt.

There is a collections limitation period, which is sometimes known as a CRA statute of limitations. Each tax debt has a six- or 10-year collections limitation. However, this doesn’t mean that you can simply avoid the CRA for 10 years and get away with not paying your taxes. There are various ways in which the CRA can “reset the clock” on the 10-year limitation period. For example, if the CRA takes steps to collect the debt five years after your return has been filed, this resets the clock to 10 years. Also, if a taxpayer chooses to acknowledge the debt through a written promise to pay or a payment on the debt, this may also reset the clock for the CRA. For these reasons, you should be extremely careful when dealing with your tax debt.


What to Do When You Owe CRA Tax Debt: How To Deal with CRA Collections


The CRA will not simply forget about your tax debt. If you owe the CRA money, it is best to act quickly. After all, you continue to be charged interest on your outstanding debt the longer you go without payment. However, it’s not a good idea to act too quickly and do something without thinking.

If you owe a debt to the CRA, the best course of action is to pay it in full right away. However, if that isn’t possible, you’ll want to make sure you act correctly.

Whether you are faced with personal tax debt or have a CRA corporate tax payment outstanding, when you’re dealing with the CRA, it’s crucial that you handle the entire process carefully.

The CRA tends to work in confusing and difficult ways and a misstep can be costly. That’s why you’ll want to speak with the ex-CRA experts at Farber Tax Solutions right away. We have extensive experience and a proven track record of successfully resolving tax issues. Do not jeopardize your financial future and potentially leave yourself open to CRA collections actions and even potential prosecution by the CRA. Work with a team that you can trust. We know to how to stop CRA collections. Please contact us today to find out how we can help you.

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Farber Tax Solutions can help you successfully deal with CRA collections. We utilize the experience of our ex-CRA professionals to:

  • 1| remove existing collections action;
  • 2| prevent future collections actions; and
  • 3| help implement an affordable payment arrangement that is acceptable to the CRA.

In some cases, collection actions can even be postponed altogether. Our staff have over 65 years of combined experience working at the CRA and utilize their insider knowledge to help secure the best deal for you.