Category Archives: Canada Revenue Agency

Best Practices in Dealing with the Canada Revenue Agency (the CRA)

It is a well-known fact that dealing with the CRA is never an easy task.  To make things worse, the combination of dealing with the most confusing and complicated statutes ever written by tax lawyers, and dealing with the CRA, one of Canada’s most powerful and sophisticated agent, can prove to be challenging to even the most experienced tax professionals.  Taxpayers should never even think that they can resolve their tax problems easily or quickly on their own without professional help.

Always remember that what you say to the CRA can be harmful to your case.  As the information you provide to the CRA can be used against you. It doesn’t matter how friendly the CRA agents seem to be. Their jobs are to collect tax revenue, not to protect your interests.

Typically, professional help can ensure you pay the least and legitimate amount of tax.  However, there will be a fee involved for any professional service in dealing with the CRA’s tax problems. As taxpayer, you need to weight the costs and benefits of hiring a professional help while making sure the overall benefits outweigh the costs.  The bottom line is that at the end of day you are financially better off after professional fees are paid.

When dealing with the CRA, just like dealing with court system, you need to keep good documentation or proof.  Keep a good log of the communications with CRA agent including after talking to the CRA over the phone, write down what you said, and what was the response from the CRA; write down the details such as the number, the date and the time of calls you made to the CRA, and more importantly the agent ID and name of the agent you spoke to.  The CRA has many agents with different levels assigned to them answering the calls – and without a way to track the person you spoke to – you might as well not bother with writing down anything.

Another good practice is for you to try to pay some or full amount of tax owing whenever possible because this will stop the interests compounded daily from growing. Some people worry about paying taxes is a sign of admitting guilt. That is far from the truth. The payment itself will not be treated as if you have accepted defeat.  If you end up being right after the fight, that money you prepaid will be refunded.

The Canadian tax system works on the voluntary basis therefore taxpayers are under obligation to correctly report and paying the taxes owed.  If the CRA comes after you because you did not file one time or pay the tax owed, you are required to pay penalties, interest on the amount you should have paid.  As a rule of thumb, every seven to ten years the principal can be doubled depending on the interest rates. Many taxpayers are overwhelmed when they discover that of the large tax debts they owe, half is the interests.

Paying the tax debts as early as you can may become one of the best actions you’ve ever taken; even if you can’t pay it off in a lump sum, do make a budget to start paying it by installment and do it immediately.  Believe it or not, trying to resolve any tax problems with the CRA can take long time. For instance, tax dispute or tax relief with the CRA can take years.