Spring has finally sprung in the North and with it comes the invigorating long daylight hours. This is also season when some of us dread the mailbox, or that email if you signed up for the Canada Revenue Agency’s (CRA) online service.
You have filed your 2017 tax return and you are expecting a hefty tax bill. And you are broke.
You are wondering when the CRA will cart away your house. Likely not, and more on this later.
The CRA cannot take legal action to collect until 90 days after they have issued your income tax notice of assessment.
Being unable to take legal action to collect does not mean the CRA is content to wait it out. The CRA will encourage you to pay by sending you monthly reminder statements. Ignore those and you can expect an ominously worded 'pay up or we take legal action' letter. This is when you have the undivided attention of a CRA collection agent.
From this point on, you will receive a few more collection letters. You might even receive phone calls if the amount owing warrants it. If these reminders and the friendly calls don’t get your attention, their next move will. The CRA will send a garnishee order to your employer without court authorization. That means your employer must submit a portion (about 35 per cent) of your paycheques directly to the CRA until your tax debt is settled. This is an administrative pain your employer doesn’t need and an embarrassment you don’t want. If you are self-employed, the garnishee order will be sent to your bank and your customers. It’s a move guaranteed to strangle your cash flow and business credibility.
Hiding under a rock will not make your taxes vanish so here are two options for tackling it.
The CRA’s tax collectors would rather work with you than head butt you into paying your taxes.
You can buy a lot of cooperation by contacting the tax collector before you are contacted. CRA collection officers have an obligation to work out an acceptable payment arrangement that allows you to avoid undue financial hardship.
Ask for a 12 to 24 month repayment schedule if that is what your cash flow permits. You can expect a hearty push back for any repayment schedule that exceeds 12 months. At the same time, the tax collector knows they can’t squeeze blood from a stone. The bottom line is you have to make regular (monthly) payments, no matter how small.
A better, no-contact alternative is to forward 12 posted-dated cheques (or make pre-authorized online monthly payments through your bank) to pay your taxes off.
So, can the CRA seize and sell your home if you owe an egregiously excessive amount and you simply cannot pay it off?
The CRA can, but that likely won’t occur. It is not the CRA’s policy to seize and sell your property if that leaves you homeless. More likely, the CRA will go to court to get a certificate against you and register a lien on your house. The lien cannot force you to sell but when you do, the CRA will be third in line for the sale proceeds, right behind your bank and secured creditors (if any).