CRA Assessments: A Tough Negotiation

CRA Assessments: A Tough Negotiation

calculator photo

A common feeling amongst many professionals, business owners, and self-employed individuals is the nervous sensation that accompanies any type of letter from the Canada Revenue Agency (CRA).  Generally speaking, it doesn’t matter what the letter says, nervousness accompanies anything that arrives from the CRA and people have a tendency to be scared of what is inside.

As part of Prime Minister Trudeau’s new budget, the Federal government has made it clear they plan to enforce what they call Tax Fairness: “As a matter of fairness for all taxpayers, the Government is committed to preventing underground economic activity, tax evasion and aggressive tax planning.  The 2016 Budget has increased resources to ensure more effective administration and enforcement of tax laws” (Canadian Government Budget in Brief:  More specifically, the new 2016 Budget proposes $185.8 million over 5 years to be allocated to the CRA (Budget 2016: This means that in the near future more collections officers are likely to be hired, and more resources will be dedicated to ensuring compliance and payment of tax in accordance with the Income Tax Act.

In the event that you receive a collection letter from the CRA, or they request information relating to your taxes, make sure you contact your accountant immediately to get assistance with your response and to ensure that you are providing the proper information; there very strict time lines in place, so don’t procrastinate with this task!

If you ultimately receive an assessment for taxes owing there is a very unique circumstance you’ll need to plan for: you owe the tax unless you can prove that you don’t!  When faced with this situation you have several options (generally speaking) to consider:

  1. Appeal the amount owing – this option will require the help of an accountant or lawyer who is familiar with the administrative requirements.
  2. Ask the CRA for forgiveness of the penalties and/or interest associated with the amount owing. As with the example above you will typically need some professional advice to help get the CRA to approve this.
  3. Pay the debt in full.

Unless you are successful with an appeal, or the CRA grants you some kind of forgiveness or interest or penalties, the collections officer assigned to your case has a mandate to collect IN FULL from you. The CRA will continue to try and collect and in most cases a payment plan will be reached for you to pay back the debt.  Before entering into a payment plan, you should first prepare a budget to ensure that you can afford the agreed upon payment terms, otherwise, you may default on this arrangement or you may become insolvent.

 What if you can’t pay CRA in full? 

If you are unable to pay the CRA in full then a proposal under Canadian Insolvency legislation may be your best option because a Licensed Insolvency Trustee can help you settle your CRA debt for less than what you owe.  Don’t be fooled by other companies who claim they can help you achieve a lower payment plan. Only a Licensed Insolvency Trustee can file a proposal under Canadian Insolvency legislation, which can be accepted by the CRA.

As a Trustee I meet regularly with people who have debts and who owe taxes to CRA, and they almost always wish they got our company involved sooner because in many cases they have paid a lot of money into payment arrangement that they can no longer afford.  With the involvement of a Licensed Insolvency Trustee the overall settlement could possibly have been lower, and the monthly contributions more manageable.  A key lesson here is to involve the professionals as soon as possible so you can reach the most manageable solution for you.

Finally, although I am knowledgeable on the topic, I’m not a tax practitioner, the bottom line is that if you’re in this situation you are best served to get advice from an expert.

As always, I’m happy to provide referrals to some great accountants or lawyers if needed, or can discuss your own, or your client’s, financial situation.  Click here to access my calendar and set up an appointment for us to connect, I’m happy to offer some additional advice or support if needed.