tax debt

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.

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 apply these funds towards your outstanding debt.
  • Freezing you 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 is able to 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 the following 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.

What to Do When You Owe CRA 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.

When you’re dealing with the CRA, it’s crucial that you handle the entire process carefully. 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.  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 Tax Solutions Canada right away. Please contact us today