Category Archives: CRA Bank Freeze

Is Your Bank Account subject to CRA Bank Freeze?

If there is money owed in taxes, the CRA will do all they can to make sure they get it. It won’t be a case of asking what you can afford to pay, as they will take legal action to make sure that they get everything they can. This will unfortunately lead you into great difficulties as one of the things they can do is put a CRA bank freeze on your account.

What is even worse when it comes to a CRA bank freeze is the fact that it can be really unexpected. There is no need to get the permission of the courts and no need to tell you in advance when this is going to happen. Clearly they will not tell you as it would be simple enough to take the money out of the account meaning that there is nothing left for them to take. The first you will know about a CRA bank freeze is when you try to take money out of your account and you are not able to.

You will have been made aware that there is the money owed, and given the chance to pay it off, but most of the time the money is not paid because it would lead to financial hardship rather than just not wanting to pay. There will be a letter sent out as a way of pre-warning and you are told that you could have legal action taken against you.  There are two letters sent and the threat of legal action leads a lot of people to believe that they are going to have time to sort the mess out rather than face a sudden CRA bank freeze.

Once the bank has received the letter known as the “Requirement to Pay” there is nothing they can do other than comply. They have to place a CRA bank freeze on the account.  Once this happens, life can become very difficult and you will find that you face difficulties in all areas of your life including seeing your debts growing.

Your mortgage will not be paid and nor will any direct debits or standing orders. You will be defaulted and often have additional charges added. A CRA bank freeze will even prevent you from taking out cash to buy food. There is the chance to have your salary paid into a new account, but you will have to find a bank prepared to trust you enough to let you open an account with them, after you have had a CRA bank freeze placed on your old one.

There is a way to deal with a CRA bank freeze, and that is to get someone to help you deal with the CRA. It may not be possible to pay off the debt before the freeze happens, but they will be able to work with the CRA to either get extra time, or have the freeze lifted. This is not an easy thing to do, but with the right help and strategy it is possible.

How the CRA Collections System works?

How the CRA Collections System works?

Since 1st August, 2005, the Canada Revenue Agency (CRA) has been given the responsibility of the cra collections of tax debts which was previously being handles by the Human Resources and Social Development Canada (HRSDC). CRA collection has the accountability for tax debts that are due to HRSDC through student loans, employment insurance, old age security, employment programs and Canada Pension Plan.

When the tax assessment or a reassessment is not paid, the balances which are unpaid are drawn from the relevant accounting system and these balances turn into collection accounts. There is a distinct accounting system for each line of revenue. The lines of revenue are corporate tax, personal income tax, Goods and Services Tax (GST) and salary deductions by all employers.

CRA Collections Agency

CRA Collections agency has to recover the entire balance of tax debts or make arrangements through individual payment plans from defaulters to recover the tax debt within a specified period of time. Recourse to legal action is taken when the defaulters are not able to arrange the filing of their tax returns. The kind of legal actions that can apply include certification of the debt in federal courts, garnishing of wages and accounts receivables, placing a lien on the assets of the taxpayer, setting off the tax debt against other government payments and seizing the assets of the taxpayer.

CRA Collections Agency can also take the tax defaulters and debtors to court in order to collect the debt which has not been paid. The procedures used by CRA Collections agencies to collect the outstanding tax debt amounts could be a combination of both automated and manual intervention. The CRA collection procedures may involve sending computer-generated letters, making reminder telephone calls, organizing field visits by the agents and sending legal notices.

The CRA collection activities take place through the Revenue Enforcement Management Information Tracking System (REMITS). This is done through a national collection call centre in the capital city of Ottawa and at eight other locations that organize collection for personal tax and Goods & Services Tax. The mode of collection will be determined by CRA collection authorities depending on the complexity as well as the size of an account.

REMITS of CRA collections arranges letters to all the tax debtors and takes care of specified accounts for which prior arrangements have been made. The call centre of CRA collection is responsible for outbound calls principally to those tax debtors whose outstanding amounts are below a specified dollar limit. The call centre is equipped with a telephone calling system which enables it to dial out to taxpayers automatically. The national pools make these outbound calls not considering any specific geographic boundaries for both individual tax and the Goods & Services Tax below a specified dollar limit.

CRA collection pools also conduct restricted enforcement actions such as garnishing the wages or accounts receivables of the taxpayers. The Tax Service Offices handle the more complicated accounts and conduct a range of legal enforcement like the seizing of assets or placement of liens on the properties of the tax defaulters.

An Overview of a CRA Bank Freeze

Once a tax debt is established, the CRA can take legal action and certify that debt in federal courts. This will be done after several requests by phone and in writing to the taxpayer. If there is no tax payment plan proposed by the taxpayer, it will empower the CRA to attack your assets as lien against your tax debts. The seizing of your assets may begin with a CRA bank freeze.

When you open a bank account in Canada, you are asked to furnish a Social Insurance Number, confirming that you are a resident of Canada. This number is used as a database which the CRA taps into to determine the details of your bank and your accounts. The CRA also keeps this data through any cheques you may have sent to the agency towards tax payments in the past. People also sign up for reasons of tax refund deposits or social benefit payments. There are various ways that the Agency can use to find out methods of your bank details and affect a CRA bank freeze.

Once your tax arrears have been certified by the CRA, they have the full power to the funds you hold in your bank accounts. CRA sends a Third Party Requirement to Pay (RTP) letter to your assigned bank. Once the bank gets this letter, they have to surrender the money to the CRA as a requirement for the sum as indicated in the letter. Your bank account is free for you to use once the required amount is sent to the CRA by your bank and the CRA bank freeze is released.

If the balance in your bank account is less than the sum demanded in the letter, the bank has to forward the entire sum in the account as on the date it receives the RTP. All deposits made to your account after this date will be forwarded also to the CRA until the sum demanded is paid in full.

If the CRA is not aware of any other bank account of yours, that particular bank account will not be affected by the CRA bank freeze. If your bank account happens to be a joint account where another person is also operating at the same time, you still face a CRA bank freeze for that account and the bank will be forced to honour the demand as per the RTP. It is, therefore, not a good idea to have a joint cheque account in a bank for any mortgage or insurance deductions when you feel that there may be a risk of a CRA bank freeze.

The CRA is empowered to affect a CRA bank freeze only to those bank accounts that are pertaining to you. It cannot freeze the bank accounts of your spouse or any other relations. The use of a credit card that has been issued by your bank does not get affected by the CRA bank freeze because the card is actually issued on behalf of Visa, MasterCard or American Express. A bank account RTP is limited only to that bank account. In very rare cases where there is a huge amount of tax funds as default, there is a possibility that the CRA bank freeze may also spread to other credit lines of yours.

Dealing With A Bank Freeze by Canada Revenue Agency

 

When taxpayers have tax debts owing to the Canada Revenue Agency (or CRA for short) the CRA collection agents will begin to pursue legal collection action to recover the tax debts. One method that the CRA collection agents like to use to collect debt is by freezing a bank account commonly known as bank freeze.

 

Unexpected Bank Freeze

A frozen bank account can be extremely shocking and can cause tremendous financial stress. Many people feel frustrated when they find out that the bank has frozen all of the funds in their bank accounts. In general, however, bank freeze is a legal action aim for collection of tax debts. Taxpayers usually get pre-warning about the tax owing and potential legal enforcement actions: first you will be notified in writing that a tax debt is owed;  then you will be sent another letter demanding payment of the tax debts;  finally, a “Requirement to Pay” letter is issued to your bank, demanding the bank to freeze your bank accounts.  Legally, the bank must freeze the bank account as instructed to be in compliance.

Damage of Bank Freeze

Once the CRA put on a bank freeze, your mortgage will for sure default and you will not be able to take money out even to buy groceries.  You may have to open new bank accounts with another bank. In general, once the CRA has frozen a bank account. The credibility or trust you built over years will be compromised. The banks become cautious in dealing with you. After all, the CRA is one of the most powerful agencies in the country. Most banks will stop renew mortgages or offering credit and may even close your line of credits if you have them. Tax debts to CRA are the worst kind of debts banks want to get involved.  Sometime, people with tax debts problem do take the path of filing for bankruptcy when facing the pressure of CRA legal actions.

 

Prevention of A Bank Freeze

If you have a large tax debt and have received tax debts notice from CRA asking for payment and your bank account has not yet been frozen by CRA, it is advantageous to act before the bank freeze occurs. Take action now doesn’t mean you need to come up with all the funds to pay off the tax debt. Acting now to get professional help to deal with your tax problem before the tax debts problems get out of control. Even if your bank account has been frozen you still have a chance to get them released.  Getting a bank account unfrozen is difficult but can be achieved through various tax venues.

 

Call Tax 911 Now if you have just received the notice that you own taxes. We can start the process of negotiating an affordable tax payment plan. Or if your bank account has been frozen and you do not have the funds to pay, contact us. We can negotiate with CRA collection agent to release your bank freeze and coming up with a plan to deal with your tax debt.  Contact Tax 911 Now at 1-877-918-2991 Today!