Is the Canadian Tax man calling you, and I don't mean the Canadian Tax man calling from India demanding all your steemit coins, I mean the real Canada Revenue Agency? Well, if they are, understand this in one government agency you do not want to mess with. Under the Income Tax Act they have some pretty impressive powers to get their money back and many of these processes can make that happen in as little as 24 hours
Ok, let me start off by saying, the best way to keep the CRA off your back is to pay your taxes like the majority of taxpayers do. I saw a recent statistic that suggested 90 % of Canadians file their taxes but the 10% that don't account for the 42 billion dollars outstanding (as of March 2019).
So you might wonder why I would write an article that would tell people how to hold of the CRA as long as possible, well its because I believe a big part of the problem with the CRA is that they make the tax system too complex for the average individual, they are so bureaucratic in their processes that they are ineffective at collecting money and they think they can solve the problem by throwing bodies at it. They have recently hired a number of these relatively junior positions at a starting salary of $52,000 dollars a year plus benefits including a pension.
Now don't get me wrong, I am honestly very happy for the people lucky enough to have been hired. I hope these jobs carry them through to retirement, and the way the Canadian economy is going, I suspect they will have these jobs for a long time. I however think its time the CRA changed their ways and saved taxpayers millions of dollars.
One of the of the problems with the CRA collections system is their internal goal of churning accounts. Employees are evaluated based on the number of accounts moved off their list, how do I know this, well if you ask the collectors the right questions its amazing what they will tell you. I spoke at length with one employee who tells me that they manage over 200 accounts and get evaluated on how quickly they can move them off their list. She told me the easiest way to move an account off their list is to setup a payment arrangement but all too often these arrangements are broken by the taxpayer in a relatively short time.
So if they have started calling here is how you can have some fun!!
Let me be clear none of these steps will keep the CRA collections team off your back forever, it will simply help you to frustrate them as much as they might be frustrating you. None of these steps will eliminate your debt if anything the delays will cost you more money as interest and penalties will continue to accumulate on your account.
First off one of the most time consuming things the CRA has to comply with is what is called an ATIP. This is an Access To Information and Personal Information Request, these can now be requested online online and it is really easy to do. As a taxpayer in Canada you are entitled to ask for this information, it may cost you $5, but it is well worth it as it tends to buy you some time and it may show you what information they have about you and how they might try to collect their money. Every action these Collections Contact Officers (CCO) take is documented in the system, they do this more for internal control then external concerns, and these details include what banks or employers they might go after, if they have completed a credit bureau or property search, even if they are planning on sending someone out to review your accounts or visit your properties. One thing that I see showing up more and more is a summary of the account and their plan of action, this is great information as it allows you to get a head start on protecting your money from being taken and bouncing cheques.
Your ATIP request should include a request for any and all documents, correspondence, internal notes or communications referencing your name and SIN as it relates to the collection activity on the said taxpayers account for any current or previous outstanding debt. Some of the information will be redacted (blacked out) if it references a different taxpayer account but they should send you copies of all their notes and collections efforts, including dates of letters and phone calls. Be sure to use a prepaid credit card to pay for the ATIP
The ATIP may not stop them from taking legal action on your account but they have to respond and internal bureaucracy means this becomes a priority over collecting on your account. There is a good chance they will delay pursuing legal action on your account for about 30 days while they give you time to get your ATIP response.
Another step is to file a Notice of Objection (T400A) or T1 Adjustment (T1ADJ). Under the income tax act an individual has 90 days to file a Notice Of Objection (NOO) after an assessment has been completed. The T1 Adjustment is a way of refiling your taxes and updating your deductions. Even something as simple as an additional medical receipt or donation can be submitted, this in turn resets the 90 day restriction period on the tax year in question. It will NOT prevent them from collecting on other tax years if you owe for more than one.
In the past when you received that collections call you could ask them how much you needed to pay each month and they would give you a number and you would move on, now they will ask you if you can pay it in full and if not they will require a letter from your bank proving you cannot borrow and in some cases they have asked the banks to confirm you don't have credit available to pay it off. The best response for this tends to be "I owe you and everyone else and I'm behind in everything so the banks won't lend me money." That comment seems to automatically get us to the payment arrangement process and many clients haven't had to provide the Letter of Decline from the bank.
Whatever you do DON'T tell them what banks you actually deal with by telling them what banks you deal with you are giving them ammunition for their Requirement to Pay. This is a legal document that can be sent to virtually any bank within 24 hours and the banks will freeze your account. All the banks process these documents from a central location so the CRA does NOT need to know what branch you deal with. Once the bank receives this legal document they freeze your account and send any money in that account to the CRA, the worst part is your cheques start to bounce and your credit rating is impacted. You are best to tell them you deal with one of the big banks that you don't actually deal with.
An interesting way around this problem is to deal with a Credit Unions. In Ontario, Alberta and BC most Credit Unions do NOT have centralized offices to process the Requirement to Pay so the CRA needs to know what branch you deal with. This information is not always available to them even if you have paid them from your account in the past. To get this information from the Credit Union a higher level CRA agent has to submit a Request for Information from the Credit Union and this takes time as the higher level agents have their own accounts to collect on so they don't want to spend time writing up RFI's for someone else ... remember they need to churn their own account. Having a Credit Union account could give you up to almost 30 days to move things around.
Another approach to protect yourself even at the big banks is to make your accounts joint. Your debt with the CRA is only YOUR debt so they cannot take money from a joint account where the money might belong to someone else. If both account holders owe money to the CRA you could be out of luck. I recommend putting one of your kids on as a signing authority for living will purposes so this prevents the CRA from getting the money but also allows your kids access to your account if you are having health issues and cant get to the bank.
Don't identify yourself on your voicemail. If they know they left a message on an identified voicemail for the taxpayer they are chasing, they consider this to be a legitimate attempt at providing you what they call a "Legal Warning". The CRA likes to give you a warning before they take your money, by doing so they think they don't look so bad in the court of public opinion. If you get this warning letter from the CRA and it has someones name at the bottom, make sure you have no money in your bank accounts that they can take and get your payroll deposits moved to a new account ... maybe at a Credit Union. I have been told this warning is only good for one year but I have seen legal action taken more than one year after the letter was sent. If there is no collection officer noted on the bottom of your letter there is a good chance no legal action will be taken until you hear from a collection officer.
Remember that every employer provides the CRA with a copy of your T4, in many cases they also receive tax slips for contractors. These slips provide the CRA with the name and address of your employer or customer and they can send the Requirement to Pay directly to them. This means they collect their money from your earnings. The tax slips also provide the CRA with your current address. Employers are one of the first places the CRA will target for payment and information. All too often the employer will hand out your contact information, other employers, etc. So, if you owe the tax man and quit your job, don't tell them where you are going. If they hit your employer you can always try to find a different job, but if you would rather stay where you are ask them for an advance on each paycheck. Employers are within their rights to collect on any advances PRIOR to paying the CRA so when you get paid the Employer gets their money back first and there is very little left to give to the CRA.
If you think you have avoided them for as long as you can and you don't want them to take legal action against you I recommend making regular payments. One really good way of irritating them is to make irregular payments at inconsistent amounts. To churn their accounts they can set these payment arrangements up in the computer and it counts, if however the payments are irregular they have to monitor them manually .. thus no churn. Be sure to make at least the minimum amount they expect so they cant take legal action. If you are making minimum payments and they garnish your account complain to the Minister of Revenue and let them know you were making the minimum payments and it caused you undue hardship.
These are just a few thoughts I have many more and will share them over time. Remember though if they are calling the best way to keep them off your back and prevent them from causing you a great deal of grief is to cooperate with them and pay your taxes. If you need to avoid paying anything because you need your money ... don't tell them anything.
Please feel free to leave any comments or experiences below. I am always open to feedback. Also if you work for the CRA and would like to share some additional tips send me a note.