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CRA Issues New Tax Collections Policies

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CRA Issues New Tax Collections Policies

CRA Issues New Tax Collections Policies


The CRA has cancelled information Circular IC98-1R5 and replaced it with a sixth version (http://www.cra-arc.gc.ca/E/pub/tp/ic98-1r6-e.html), which provides a new overview of CRA collections policies for individuals, corporations, GST registrants, employers and those who import or export or travel across borders. 

 

Advisors and clients will want to refresh on their obligations:

 
1. Outstanding Amounts

All amounts owing to the Receiver General are due on assessment or re-assessment and CRA may take legal action to collect unpaid amounts at any time.  This includes garnishment of wages or other income sources, seizure and sale of assets as well as any other means under any applicable statutes or laws to collect an amount owing.  As a matter of practice, CRA has the ability to suspend collection of an outstanding debt when an objection, using form T400A is filed within the proper time frames.

 
 
2. Collection Restrictions

CRA is restricted under statute from initiating any legal collection action until 90 days following the date the Notice of Assessment or Re-assessment was mailed to the individual’s last known address.  Legislation allows CRA to by-pass this statute if there are reasonable grounds for CRA to consider the amount to be collected in jeopardy by delaying collection action.

 

Exceptions to this rule exist and primarily among them are payroll deductions that are not remitted by the employer as well as non-resident tax under S. 215(4) of the Income Tax Act.  CRA may initiate collection action on this debt immediately.

 
 
3. Offsets

CRA has no obligation to issue refunds to individuals or businesses when an outstanding debt exists, or if an objection is filed that affects the outstanding debt.  However, CRA has also stated that they will not usually offset a refund against an outstanding debt, other than a deemed trust debt, if the Appeals Division or Tax Court has not yet made a decision.  Any deemed trust debt, such as GST/HST and payroll remittance overpayment refunds that may be due, are withheld and applied against the debt until such time as the issue is finalized.  In the event the individual is successful with an objection, CRA will refund the amounts withheld with applicable interest.

 
 
4. Interest Costs

CRA calculates interest on outstanding amounts at prescribed rates plus 4% which are adjusted quarterly. 

With the current prescribed rate of 1% interest is charged at 5%. Interest costs are compounded daily on the outstanding balance of the debt.

 
 
5. Director's Liability

A Director of a corporation may be held personally responsible for corporate debt to CRA if the amount owing is due to the corporation’s failure to deduct, withhold or remit amounts that are deemed to be in trust and are not collectible from the corporation.  This provision under S 227.1 of the ITA would include GST/HST and payroll deduction amounts. Advisors may wish to review these rules whenever they see corporate directorship fees as well as with business owner clients.

 

 

CRA is actively stepping up the collection policies available to them and, with interest compounding daily along with the addition of penalties where applicable, “borrowing” funds from CRA can become quite expensive.

 

Article courtesy of the Knowledge Bureau, www.knowledgebureau.com

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