Can CRA Garnish Personal Wages on a Business Insolvency?
Business Insolvency & Personal Wages
It is common for those who own businesses, whether or not the business is incorporated, to fail to meet tax payments.
These can come in the form of everything from payroll taxes to income tax to HST payments.
Often, this represents a way to handle liquid cash issues in the event of the company struggling.
However, though it may stem the tide on the short term, it creates a substantial issue with the Canada Revenue Agency.
For incorporated businesses, when the business declares bankruptcy, the company’s assets get liquidated to account for the business’s debts including tax debt.
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In the event that there is insufficient money to pay the CRA, then the director will be held liable for all amounts deemed trust owed to the agency.
This means that any monies the business garnered for the CRA but did not remit back to the CRA.
A solid example is HST that gets taken from clients for the CRA as well as taxes taken from payroll.
These should both be paid to the CRA and are therefore deemed trusts.
In the event that the business does not pay them, the Canada Revenue Agency is empowered to go after directors to gain payment – though they cannot garnish wages.
This is true both if the corporation goes the route of bankruptcy or not.
Either way, the CRA can go after the directors of the corporations for amounts of deemed trusts not paid.
Therefore, if you are a director at a new position, they can then garnish the wages at your new position.
So, in the event that you owe funds to the CRA resulting from a business which failed, you ought to attempt to create a payment arrangement in order to pay off the debt.
Should you not be able to do so, speak with a Licensed Insolvency Trustee to learn your options – whether they are bankruptcy or consumer proposals.
They will assist you in finding the most responsible financial path.