Published: April 10, 2020
Last Updated: April 10, 2020
Never speak to CRA by yourself
It’s tax filing season. Tax questions often arise in the course of preparing returns, while planning to reduce taxes, or after receiving a letter from CRA. It’s common for Canadians to call CRA for answers and explanations. While the CRA call centres are supposed to provide help to taxpayers, in practice they may produce pitfalls. A recent CBC News article stated that 25% of callers to CRA’s business enquiries call centre received misleading or incorrect answers, yet taxpayers acting on this misinformation will not be given leeway by CRA auditors, collectors, or non-filer officers; full fines, interest, and liability will be applied. When faced with general tax questions, Canadians should not turn to CRA for answers.
The Canada Revenue Agency routinely contacts individuals and businesses by phone or by mail (never email). While such contact is routine for CRA it is never routine for the taxpayer, and it is important to respond through a professional and never to speak to CRA directly. The mission of the CRA is to administer tax and related programs, and to ensure compliance. It is not to help Canadians plan tax strategy and certainly not to help the taxpayer reduce their amount of taxes owing.
The most aggressive contact is from CRA’s Collections Agents, but taxpayers need to protect themselves when contacted by any CRA employee including Auditors and Non-filer Officers as well.
A Collections Officer has wide-ranging collection and enforcement powers. A collector is assigned when a tax amount is owing and their mandate is to collect money, not to be polite. They have tools to enforce the debt, including the ability to seize salary and bank accounts and to lien property and do not require court authorization. A tax debtor can expect to receive letters, calls and personal visits from a collector and third-parties who may have information about the taxpayer will be contacted as well (and should seek advice before responding).
Aggressive contact from collectors is routine and many taxpayers are intimidated into providing information and making rash decisions and payments simply to try to get the collector off their backs. Information that a taxpayer should not be volunteering without advice includes details about their personal assets when their corporation owes arrears (and vice versa), or financial information of a spouse. Collectors will insist that the taxpayer must disclose this information when it may not be the case. Collectors may suggest that a part payment of a debt will reduce the total amount owing, and this is never the case. Without knowing a collector’s powers, inappropriate private information may be released and anything that a Collector is told will be used to seize assets and to collect from the tax debtor. Collectors will also pressure individuals into making payments on behalf of their corporations even though they do not have any obligation to do so.
Many contacts and tax problems begin when a taxpayer is selected for audit by CRA. Some auditors may appear friendly but are there to ensure compliance, which is another way of saying that auditors make sure a taxpayer is paying what CRA says is the correct amount of tax, which may be more than is in fact owing.
Generally if an auditor isn’t provided with the correct document that corroborates an expense the auditor will disallow the expense. They may also assess undeclared income for non taxable amounts received such as an inheritance or gift remittance from overseas and then apply penalties. If incorrect information is provided, including statements in phone conversations, the auditor will record the inaccuracies and later use it against the taxpayer as evidence, even if the error was genuine or due to ignorance. Without representation, it is difficult for most taxpayers to know how to answer audit questions and what information or documents to provide and what to withhold.
The Non-Filer Division of CRA tracks down taxpayers who have unfiled returns. Once a non-filer is identified, CRA sends letters reminding the non-filer to submit outstanding returns. If CRA is ignored for a prolonged period of time, the process can result in prosecution resulting in a fine, jail term, or both.
Non-filer Officers employ many of the same tactics Collectors use to push a taxpayer to bring their filings up to date. Without proper information or representation, a taxpayer may hastily file an incorrect return or accept an unreasonable filing deadline from a non-filer officer.
"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."