October 12, 2023
Dealing with the CRA in any capacity is not seen, by most taxpayers, as a pleasant engagement to partake in, quite the opposite in fact. It can often feel very intimidating as a consequence of the power and information held by the organization, which tends to make people avoid them altogether. However, avoiding the CRA comes with a set of outcomes that can have detrimental effects on to your financial health. To illustrate, we will consider the outcomes of non-compliance from two separate divisions of the CRA – collections and compliance.
From the compliance division perspective, the most common form of non-compliance is not filing your tax returns. In this instance the CRA will prompt you to file by issuing demand to file letters requesting returns be filed within 30 days of the date of the letter. They may even choose to call you to remind you of the filing requirements. If their attempts go unanswered they may process arbitrary returns. An arbitrary return is an assessment done by the CRA with an eye on to enforcing compliance with filing requirements. These assessments are generally inflated estimates of what is owing and aimed at incentivizing taxpayers to file factual returns. There is a 90-day period to formally object and submit factual returns before the amounts become legally collectible. Failure to respond accordingly may leave you liable for the arbitrarily assessed amounts.
From the collection’s division perspective, the most common form of non-compliance is not paying or remitting your taxes. If you have a balance outstanding a collections officer may be assigned to your account to enforce compliance by collecting on the balance owing. Usually, collection efforts begin almost immediately in the form of phone calls followed by a legal warning letter asking you to respond within 14 days of issue. Failure to respond to legal warnings issued by your collection officers allows for legal action to be directed towards your bank account, wages, or assets.
Non-compliance is a road you do not want to go down within the CRA as it can lead to unexpected consequence which, if left unattended, can become financially painful. You do not want to wake up one day and find your bank account frozen and drained.