Owing Taxes and Dealing with the CRA

Had a nasty run-in with Canada Customs and Revenue (CRA) this week – they froze all my bank accounts! I admit, I owe taxes – as I do each year because I’m self employed – but I diligently pay them off with monthly installments. For some reason, the CRA still sent my bank a ‘Requirement to Pay’ and they blocked access to all my accounts. So, can the CRA do this, even though I’ve been sending them payments each month?

Well, according to the lady in collections – yes! She informed me that taxes are due each year on April 30/08 and that the CRA is not a financial institution. Even though I send payments each month – because I’m a responsible tax payer – it wasn’t enough to cover the entire debt. I was supposed to have called and made some kind of payment arrangement … thanks for telling me!

Apparently, I was sent a collection letter – which I did not get – but the lady said it doesn’t matter. The CRA doesn’t even have to registered letters!

I guess I assumed that as long as I sent something, there was very little they could do. Admittedly, I was probably stretching things a bit and maximizing my cash flow – you gotta love off-balance-sheet financing!

Here is a direct quote from the CRA website:

If you cannot pay your balance owing on or before Apr 30, 2008, we will accept a payment arrangement only after you have reasonably tried to obtain the necessary funds by borrowing or re arranging your financial affairs

Here are a few things that I recommend when it comes to paying your taxes on time:

• Even if you can’t pay your taxes on time, still file on time to avoid the late filing penalty- it’s like 5% of the balance owing!
• If you’re self-employed like me, try to pay installments throughout the year – when tax time is due, there should be enough in your account to cover the balance owed
• Don’t finance through the CRA – interest is compounded daily. It may be cheaper to use your own line of credit, etc.

At the end of the day, this situation has left me quite annoyed. Why be so nasty with someone who has an excellent payment record like me? What are they doing about the billions of tax dollars that have been outstanding for years?

Is it easier to go after someone like me who will ultimately pay? Or, is it too easy to write off delinquent accounts that will require too much effort to collect?

It seems to be all about following the ‘path of least resistance.’