CRA Collection Rights

Understanding The Collection Rights The CRA Holds

The Canada Revenue Agency (CRA) is a governing body that bears the responsibility of collecting taxes from individuals and businesses. The nature of tax debts differs significantly from regular debts like credit card dues as they are not loans but a result of a calculation under the Income Tax Act or other taxation laws. It is essential to understand the CRA Collection Rights and the options the agency possesses to collect a debt.

The Reality of Tax Scams

Nowadays, tax scams have become a common occurrence where fraudsters pretend to be the CRA and intimidate individuals into paying non-existent tax debts. These scammers often threaten victims with legal actions or arrests, instilling fear and leading them to pay large sums of money using unusual payment methods. It’s crucial to remember that the CRA will always send you something in writing advising you about the tax debt and will never threaten legal action or arrest merely due to a tax debt.

The Assessment Process

As taxpayers, we are obligated to prepare and file our tax returns annually, usually during springtime. If you owe money on your tax return, you are informed by your tax preparer. From the CRA’s perspective, the tax was already owed at the time you earned your income. However, it becomes due and payable on April 30 of the following calendar year, barring certain exceptions. If you fail to pay the tax you owe by this deadline, the CRA will charge interest on the debt.

The CRA encourages taxpayer compliance by implementing late-filing penalties. If you owe tax and fail to file your tax return by April 30 (or by June 15 for self-employed individuals), you may be subject to these penalties.

In cases where taxpayers are required to file a return but fail to do so, the CRA may prepare the return on their behalf. The calculations are based on tax slips they have received, information obtained from your financial institutions, or from an audit.

Receipt of Notice

The CRA will notify you of the amount of tax you owe by sending an assessment notice. This notice will also provide instructions on how to pay the due amount. These notices have traditionally been sent by mail, but they are now also available on the CRA My Account website portal. If you fail to pay the outstanding tax balance on time and do not appeal the assessment, you will receive collection notices requesting payment.

Set Off Mechanism

The CRA can set off any refunds or credits you are entitled to against the tax debt you owe. This includes the Goods and Services tax credit and various provincial rebates and credits. The Canada Child Benefit (CCB) is usually unaffected unless the debt specifically relates to a CCB overpayment.

Collection Calls and Payment Agreements

If you fail to pay the tax debt, your tax file will be transferred to a CRA collections officer. The officer will contact you to discuss the payment of the debt. The CRA expects taxpayers to manage their finances to pay the tax balance in full at the earliest. If this is not possible, the collections officer may agree to a payment arrangement over time. However, if you fail to abide by the payment agreement, the CRA will be in a position to take legal action against you.

CRA’s Legal Authority


The CRA has the authority to issue a ‘Requirement to Pay’ (RTP) if you fail to abide by a payment agreement. This RTP can be issued to any person or business from whom you may receive money. Upon receiving the RTP, the recipient is obligated to send the money to the CRA according to the terms stated on it.

Seizure and Sale of Assets

In addition to the RTP, the CRA can place liens against assets you own and may choose to seize and sell these assets. A federal court judgment can be issued against you for the tax debt, which can then be registered against your assets.

Options for Tax Debt Relief

While the CRA has collection rights unavailable to most other creditors, there are options available for tax debt relief. The first option is to make a submission to the CRA under the taxpayer relief provisions to request a waiver of penalties or interest. This can be successful if there were extenuating circumstances that prevented you from filing your tax return or paying the balance on time or in full.

The federal Bankruptcy and Insolvency Act supersedes the Income Tax Act, and people can get relief from most tax debts if they are overwhelmed and cannot make the payments that the CRA expects. The first option would be a Consumer Proposal, a legislated debt-settlement option that allows the debtor to make affordable monthly payments over time. Alternatively, if the tax debtor is in a particularly difficult financial position, they may need to opt for bankruptcy.

In both a Consumer Proposal or bankruptcy, the CRA is prevented from taking further legal action against the tax debtor and must participate in the insolvency process.

To learn more about tax debt relief options such as a Consumer Proposal or Bankruptcy, and whether they can help in your situation, it is best to consult with a Licensed Insolvency Trustee.

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