Canada Revenue Agency Got You Down? Here Are Some Tips for Dealing with the Tax Man

Owing money to the Canada Revenue Agency is by far one of the scariest financial challenges that many Canadian taxpayers face. The Canada Revenue Agency is not an average creditor because they are part of the federal government. They have significant authority with respect to enforcing tax compliance and collecting tax debts.

This authority includes (without a court order or notice to you):

1.      Pursuing criminal charges under the Income Tax Act

2.      Imposing penalties

3.      Imposing interest

4.      Notionally assessing your income even when you don’t file a return

5.      Garnishing your wages

6.      Freezing your bank account

7.      Placing a lien on your home

8.      Placing a lien on other property

9.      Garnishing your company’s receivables, and more….

The Canada Revenue Agency can be ruthless. If you have a tax debt that you can pay, you must be very careful. The Canada Revenue Agency may seem amiable and willing to make a payment plan with you. They will send you a request for financial disclosure. On the financial disclosure you will have to tell them where you live, where you work, provide all sources of income, provide all assets, banking information and more... You may complete this form being open and honest indicating all of your liabilities and payment and then based on what cash flow is left, promise a payment plan.

Once the Canada Revenue Agency receives your financial disclosure they will know all of your assets, where you bank, where you work – you will be completely exposed. Also, when the CRA reviews your budget and sees payments to other creditors like loans and credit cards, they will exclude them from the budget and ask you for significantly more in terms of a monthly payment than you are comfortable with.

This will leave you in the worst position – Who do you pay? What about your credit? What about your family? What about your job? This is how the human aspect of having a tax debt can be sometimes even more impactful than the financial consequences. Many taxpayers suffer with medical problems that stem from stress associated with an inability to pay a tax debt.

Listen, you cannot draw blood from a stone and there are many reasons why Canadian taxpayers find themselves unintentionally in trouble with the Canada Revenue Agency. A good financial consultant can guide you through programs that are available that can stop CRA collections and help you deal with your tax debt. Attempting to negotiate directly with the CRA will often lead to increased exposure so the best thing you can do if you have a tax debt you can't pay is seek professional help.

If you need help with a Canada Revenue Agency tax debt contact DebtCare Canada online or call 888-890-0888.

How to Deal With a Frozen Bank Account as a Result of a Canada Revenue Agency Tax Debt

When an individual or business has a tax debt owing to the Canada Revenue Agency, the Canada Revenue Agency will begin to pursue enforcement action to collect the debt. One method that the Canada Revenue Agency uses to collect debt is by freezing a bank account. 

A frozen bank account can be extremely disruptive and can cause incredible financial hardship. Many people feel blindsided when they go to the bank and find out that the bank has frozen all of the funds in their bank account. However, a frozen bank account that is the result of a tax debt generally doesn’t occur without warning. 

A Canada Revenue Agency collection practice usually is as follows:

1.       First you will be notified in writing that a tax debt is owed.

2.       Second, you will be sent another letter demanding payment of the tax debt.

3.       Finally, a “Requirement to Pay” letter will be sent to you and your bank, requiring the bank to freeze your bank account.  

When the “Requirement to Pay” letter is issued and sent to the bank, the bank must freeze the bank account indicated. The bank will then hold the money that is in the frozen bank account for 30 days and then will send the money to the Canada Revenue Agency.

The frozen bank account (even after the money has been sent to the Canada Revenue Agency) will remain frozen. Outside of losing all the money that was in the frozen bank account, the frozen bank account will now cause significant disruption because if your pay is directly deposited into the frozen bank account, the bank will continue to seize the money deposited into the frozen bank account and send it to the Canada Revenue Agency.

Once the CRA has frozen your bank account, you will almost always have to open a new account with another institution. Generally speaking, once the CRA has frozen a bank account the account holder will also see that the relationship they once had with their bank has been severely damaged. Most banks will stop offering credit and may even close existing credit products if they become aware that a customer has a tax debt owed to the Canada Revenue Agency. This is because some people who have tax debts end up filing for bankruptcy after being put under the pressure of CRA enforcement action.

Of course, if you have a tax debt and your bank account has not yet been frozen, it is advantageous to act before things come to that. Acting now doesn’t necessarily mean coming up with money you don’t have to pay off the tax debt. Acting now means seeking out professional guidance to deal with your tax problem before things get that far. If your bank account has been frozen you still have a chance to get your account unfrozen.  Getting a bank account unfrozen is difficult but can be achieved through programs that involve legislation that carries the power to stop certain collection actions, such as a frozen bank account.

If your bank account has been frozen or if you owe money to the Canada Revenue Agency that you do not have the means to pay, we can help – including getting your bank account unfrozen and coming up with a plan to deal with your tax debt. Contact DebtCare at 416-907-2582 or visit www.debtcare.ca.