GST/HST Debts and Canada Revenue Agency Garnishment
If CRA has assessed your business (or you) for goods and services tax (GST) or harmonized sales tax (HST) owing and you have not made acceptable payment arrangements with the Canada Revenue Agency (CRA), a CRA collections officer will commence enforcement action.
One of the many collection options available to the CRA is garnishment.
Garnishment may take many forms. For example:
- The CRA may seize your bank account;
- The CRA many notify your employer of your GST/HST debt and ask for part of your wage to be paid to the CRA;
- The CRA may find out which customers/clients owe you money and notify them of your GST/HST debt and ask that the account receivable be sent to the CRA; or
- The CRA may learn that you have signed loan documents and ask that the lender pay the money owed to you be paid to the CRA instead.
In short, if the CRA finds that someone or something owes you money, they can intercept that money by sending the payor a notice of garnishment or demand to pay.
Garnishment actions can be embarrassing because others will learn about your problems. Also, you may not get money you were hoping to spend on something else.
If you would like to avoid the embarrassing moments, negotiating a payment arrangement with the CRA is the only option. Unfortunately, unlike with income tax, collection actions relating to GST/HST cannot be stopped by the filing of a notice of objection.
When you go to the CRA to negotiate a payment arrangement, you are not in a position of power. You must be able to show the CRA that you cannot pay the full amount right away. The CRA will want to protect their interests. They may ask for a net worth assessment to be completed by you and would spouse (yes, your family may be brought into your tax problems). The CRA may ask to see your bank statements. They may ask you to get a loan from your bank or your parents.
Every discussion that you have with CRA Collections will be recorded - so you have to be very careful about what you say and keeping your cool. You also have to be careful about who you let speak on your behalf.
If you enter into a payment arrangement, it should be realistic, If you do not honour your agreement (e.g., you miss payments), the agreement may fall a part and the CRA will take the collectinos actions available under the law and will use the information you provided to them when negotiating the payment arrangement.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
