Getting audited by the Canada Revenue Agency (CRA) can be stressful; however, falling behind on payments can be nerve-wracking.
I had the opportunity to chat with Scott Hanney, Tax specialist at Goldhar Consulting & Tax Services about what happens when CRA calls.
Scott Hanney has more than 10 years of experience working for the CRA, giving him a deep understanding of how the agency operates when it comes to collections and tax enforcement. After his time at the CRA, he switched sides, using his insider knowledge to help individuals navigate CRA challenges. His deep knowledge of CRA’s collection process allows him to guide individuals through their options, successfully negotiating payment arrangements, filing relief applications, and helping them find the best path forward to regain financial stability.
Here is what he had to say.
If you’re in debt and owe CRA, don’t ignore it. The CRA has significant collection powers, including wage garnishments, freezing bank accounts, and seizing assets. Your best course of action is acknowledging the debt and proactively addressing it.
It would be best for you to contact CRA right away. Every case is different, and there may be options you haven’t explored. For example, if you need more time to pay, ask about a payment arrangement, such as monthly payments, based on your financial situation.
The reality is mistakes can happen. Please review your Notice of Assessment/Reassessment to ensure the debt is accurate. If you believe there is an error, consider filing an objection or requesting taxpayer relief. The Taxpayer Relief program can reduce interest or penalties if you experience financial hardship, serious illness, or natural disasters.
This process, however, can be overwhelming, time-consuming, and onerous. This is where an expert can step in as your ambassador. A Licensed Insolvency Trustee (LIT) could explore a Consumer Proposal, stop the interest clock, and consolidate CRA debt and other unsecured debts into one manageable payment. Rarely does a LIT start with bankruptcy as an option, but as a last resort, it could eliminate CRA debt in many cases.
It is one thing to get into trouble with CRA. However, the ultimate goal is to avoid future CRA debt.
If your tax bill is high due to self-employment, set aside money regularly or make quarterly instalment payments. If you haven’t done so, adjust your tax withholdings on your paycheck to avoid a big tax bill at year-end. Claim all of your possible deductions and credits to minimize what you owe.
Scott reinforced to me that CRA agents must treat taxpayers respectfully. The CRA has a Taxpayer Bill of Rights, which includes the right to professional, courteous, and fair treatment. You have options if a CRA agent is rude, dismissive, or unprofessional. Begin by staying calm and taking notes, including the agent’s name, ID number, date, and conversation details. Ask to speak to a supervisor if you need to escalate the issue. You can also file a complaint through the CRA Service Complaints Program if you feel mistreated. And if all else fails, you might consider contacting the Taxpayers’ Ombudsperson.
The best course of action is to be open, honest, and transparent.
Life can happen, and your financial situation can quickly spiral out of control, yet CRA can’t be ignored. Proactive communication is key if you owe money, hope to avoid harsh collection actions, high-interest costs, and penalties, and want to protect your credit and future financial stability.