When a tax debt remains outstanding for a long period of time, one of the dangers that the taxpayers face are the CRA income garnishments. These garnishments of wages can be a serious and a scary affair. Few taxpayers are not even aware that the CRA does not need to get a court order against them if they want to hit them with wage garnishments.
The Canadian Income Tax Act gives CRA the power to instruct an employer to garnish the wages of a particular employee, on notice. A legal notice is not required for CRA income garnishments.
The Notice Cycle
The taxpayer will get a string of notices before the garnishment of wages or bank accounts comes into effect. The first notice that a taxpayer receives is the intimation of the amount of tax debt and the period for which it has been kept outstanding. It will be followed by a demand notice for making the tax payment in full. If the payment is still not received, the taxpayer will get a final notice of the tax dues. If the taxpayer has not made any attempt to pay the tax dues, then he or she can expect a notice indicating CRA income garnishments. The defaulting taxpayers’ employers will also get a notice to garnish their respective wages. The payment of tax dues will have to be remitted directly by the employers to the CRA.
Unlike the CRA, all other creditors require a court order before they can take any enforcement action against their debtors. CRA does not need to go to the court for any enforcement action. It is in your best interest that you have professional tax help all the year round as in times like these when there is a possibility of you facing CRA income garnishments, it would be almost impossible for you to get the CRA to reduce the penalties or lift the garnishment enforcement without any professional help.
Extent of Garnishment
A taxpayer could be facing up to fifty per cent of his or her earnings and up to one hundred per cent of all other kinds of income, including the sub-contractor earnings. CRA is also empowered to send demand notes to clients of the defaulting business owners and get the receivables re-directed to the Revenue Agency. When this happens, there is nothing that the taxpayer can do except go through the financial disruption. Professional tax help comes in very useful as they have the capability of negotiating a possible removal of CRA income garnishments as enforcement measures.
Besides the CRA income garnishments, a taxpayer’s bank account can also get frozen when the bankers receive a requirement to pay note against the taxpayer. When the CRA wants to freeze a taxpayer’s bank account, they will indicate the amount of taxes due in their `Requirement to Pay’ note to the respective bankers, directing them to freeze the bank account for a specified period of time. If the amount of taxes is not settled within that stipulated period by the concerned taxpayer, the entire proceeds from the bank account will be forwarded to the CRA by the bankers.