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Tax Enforcement

The Canada Revenue Agency (CRA) is responsible for reviewing tax returns to check that the information provided is correct and complete and that the amount of taxes owing is accurately calculated. The CRA is also responsible for collecting any taxes owing. The CRA has specific powers they can use to carry out these duties.

Requests for Information

Taxpayers

When reviewing your tax return the CRA can ask you for more information or additional supporting documents. The CRA can ask for this information based on your most recently filed tax return or any returns you filed in the last 3 years. The request may relate to a specific issue or to the return(s) as a whole.

The CRA may also choose to issue a more formal "requirement for information" which will include a deadline for replying - usually 30 days after the notice. This type of demand for information must be complied with - failure to do so could result in criminal prosecution or a court order requiring compliance.

The type of documents or information required may be very broad - the only real limitation is that the information requested must relate to possible taxes owing in some way. The CRA may not even know exactly what they are looking for - other than ways to verify or disprove information filed on a return.

Third Parties

The CRA can also issue a ‘requirement for information’ to any other person who may have information about the taxpayer in question.

In some situations, the CRA may require a third party to provide information that would help them identify people who may owe taxes. For example, the CRA can demand that...

  • a business such as eBay provide detailed information about their high-volume power sellers so they can determine if sales income has been reported
  • an employer provide details about individuals, including customers, who may have received a taxable benefit so they can determine if taxes have been paid on the benefit
  • a municipality provide records of all municipal contracts awarded to ensure all revenue was reported by recipients

Privileged documents between a taxpayer and a lawyer are not subject to disclosure.

Unpaid Taxes

Payment Arrangements

Money you owe for taxes is due immediately. If you cannot pay the total amount owing, you can contact the CRA to see if you qualify for a payment arrangement. This will allow you to pay the amount owing over a longer period of time. Before the CRA will allow this you will need to show that you have tried to pay the amount owing in full by borrowing money or reducing your spending.

You will generally be required to fully disclose your income, expenses, assets and debts. Even if the CRA accepts some type of payment plan or allows you to postpone payment until a later time, interest and/or applicable penalties will continue to be added to the amount owing.

Tax Payer Relief

In exceptional cases the CRA may agree to waive or cancel penalties and interest under the Taxpayer Relief Provisions. These provisions allow the CRA to consider circumstances beyond your control that make payment of these additional charges unrealistic. There are certain deadlines that apply to making an application for relief using these provisions.

Collection

If you do not pay any taxes owing and you have not made a payment arrangement, the CRA can take collection action against you. Although taxes are due immediately, generally the CRA will give you 90 days after you receive your Notice of Assessment or Reassessment to pay in full before taking collection action, although penalties and interest may still apply. The CRA may issue a Notice of Arrears if you have not paid taxes owing in full within 30 days of when the taxes were due.

If you owe taxes the CRA can garnishee your wages or other income sources. Garnishment means that money that would otherwise go to you (such as your pay cheque, payments from clients or other income sources, and bank accounts) goes directly to the CRA to pay taxes you owe. They are not required to provide you with any notice. The CRA may also take money owing from other federal departments and apply it directly against your outstanding balance.

Third parties who receive such a notice are required to comply with the order. If they fail to do so, they can become liable themselves for monies that should have been turned over.

The CRA can also seize your assets, such as a car or a boat, to satisfy a tax debt. Unlike other creditors, the CRA can have the sheriff, a court official, seize certain personal assets without a court order and without notice to you. These assets could ultimately be sold to help satisfy the tax debt, and usually at considerably less than their actual value.

The CRA can also register a lien against your home or cottage without any notice. A lien will prevent you from using the property for refinancing or from selling it without first dealing with the unpaid taxes. Even filing for personal bankruptcy will not remove the lien.

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