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Taxpayers may be unaware of extent of CRA collection powers

Taxpayers who have had their file forwarded to a Canada Revenue Agency collections officer may be surprised to learn that these employees have the power to seize bank accounts and take money without a court order, Toronto tax litigation lawyer David J. Rotfleisch writes on

As Rotfleisch, founding tax lawyer at Rotfleisch & Samulovitch Professional Corporation, explains, a file is forwarded to a CRA collections officer when a taxpayer has a balance owing, but fails to file a Notice of Objection to their tax assessment within a certain timeframe.

The initial collections activity, he says, will involve a phone call.

But, he adds, “when threatening phone calls are ineffective, a step the CRA's collectors sometimes take is to make in person visits to the taxpayer's home or, in the case of a corporation, by visiting the registered offices. At this point, the Collections Officer will likely reiterate past threats if the outstanding balances are not dealt with. This method is primarily intended to intimidate the taxpayer and is, not surprisingly, shocking and scary for a taxpayer.”

However, writes Rotfleisch, taxpayers should remember that they do not need to speak directly to the CRA, as per s. 15 of the agency’s Taxpayer Bill of Rights, which says taxpayers "have the right to be represented by a person of your choice.” In these types of cases, taxpayers should seek advice from experienced tax lawyers or professional tax consultants, he says.

CRA collections officers also have an obligation to work out an acceptable payment arrangement that will allow the taxpayer to avoid undue financial hardship, says Rotfleisch.

Failing that, the Income Tax Act gives the collections officers the power to garnishee amounts owing from a taxpayer who has an outstanding balance on their tax account. This can include an employee’s wages, accounts receivable and the seizure of bank accounts or investment accounts without court authorization.

“If the above described steps do not settle a taxpayer's debt with the CRA, the next step a Collections Officer will take is to go to the Federal Court and register a certificate against the taxpayer for the outstanding debt, plus any penalties and interest that are applicable. The Collector can go to the Federal Court to obtain this certificate without notice to the taxpayer in question. Once this is done, a number of other remedies become available to the collector,” writes Rotfleisch.

These other remedies, he says, will include the power to direct the sheriff to seize the taxpayer's personal property and to place it up for auction, and the ability to place liens on the taxpayer's property.

However, writes Rotfleisch, there are restrictions on the CRA’s collections actions.

“Normal CRA internal procedure is to allow a taxpayer a period of 90 days to make good on any debt stemming from an assessment before forwarding the file to a Collections Officer. This is because section 225.1 of the Tax Act prevents the CRA from taking any collections action until the end of the 90-day period.

“In addition, if the amounts in question are income tax, then the CRA is prevented from taking legal action to collect the debt if the taxpayer has formally disputed the underlying assessment through the filing of a Notice of Objection or Appeal to the Tax Court of Canada,” he says.

Collections offers are also generally restricted from escalating legal action against taxpayers that have negotiated a payment arrangement with the CRA, he adds.

“An exception to the noted restrictions is if the amounts in question are ‘trust’ funds, such as payroll remittances or GST/HST amounts, the filing of a Notice of Objection or Appeal will not stop collections action. Because of the nature of these types of taxes, formal legal advice should be obtained by a taxpayer to ensure that the CRA does not put a corporation or businessperson out of business,” explains Rotfleisch.

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