If the CRA does not accept your tax return, it will assign an auditor and later on tax collection agent to your case. The task of the tax collection agent is to make sure that your complete tax dues are collected. In view of the tax dues not being collected in full, the tax collection agent is authorized to seize your assets as a result of the tax amount outstanding. You may also be threatened by this collection agent to have your bank accounts frozen and your income garnished.
It is the main role of the CRA to get a tax collection agent to enforce full recovery of the tax amount receivable and the agent is empowered to go to all extents possible to ensure receipt of the tax debts.
A tax collection agent can be described as a collection officer who is employed by the CRA. He or she is assigned to all those filing cases which are of very high priority to the CRA. The collection agents are experts in the art of collection of taxes and in techniques to extract the tax dues until they are settled in full to the CRA.
A tax collection agent can even take recourse to legal action to recover all the tax dues when the taxpayers have not paid their tax debts and have kept the amounts outstanding to the CRA. One of the recourse available to the tax collection agent to collect the tax debt is through freezing the bank account of a taxpayer. This process is known in legal parlance as a bank freeze.
A bank freeze is, however, a legal recourse towards the collection of your tax debts. When your bank account gets frozen, it can be a severe embarrassment to you and it will also result in considerable financial burden as you will not be able to deposit or issue cheques from that bank account. A taxpayer will generally be cautioned about the action towards freezing of his or her bank account as a result of the non-payment of the tax amount outstanding. Before this legal action is taken, the taxpayer will be informed in writing about his full tax dues. In addition to this notification, the taxpayer will also receive a `Requirement to Pay’ letter that will demand the payment of the outstanding tax amount in full. After this notification, if there is no sign of receiving any payment from the taxpayer, then the tax collection agent will move forward with the freezing of the person’s bank accounts. The bankers have no choice but to oblige and comply with the directives of the CRA.
When the bank account gets frozen, it will have an impact on almost all regular payments that are done through that bank channel. Many people pay their mortgages with standing instructions to their bankers. These mortgage payments will default and the account holder will not be able to withdraw a single cent. The bankers may not relish this notion and such kind of tax debt situations with the CRA are not looked forward to by the banks.