As the tax season approaches, more and more Canadians are "crying" on social media such as Tik Tok, claiming that they have received a notice of review from the CRA and are being asked to pay their huge arrears quickly.
A user named @erinflowersmagicpowers was even asked by the CRA about her relationship status 5 years ago and asked her to pay $86,451 in tax credit due to cohabitation.
"All of a sudden, everybody owes a lot of money, and no one understands or can explain why," TikTok user @rinaisuuu said in a video that has been viewed more than 271,000 times.
There are also claims that the CRA "ignores" the tax and continues to impose fines. Isufaj, a real estate agent, needs to fill out a complex tax return due to commissions. and had been repaying her tax balance, but learned through the CRA's email that her payments had not been made and the interest on her account was still growing exponentially.
The CRA is actively collecting debts
James Bell left the CRA in 2013 after 22 years and is now starting his own tax firm. He said more clients are coming in for inquiries now than ever before, with questions revolving around CRAs "freezing their bank accounts," "deducting their salaries," and "involving past tax debts."
The CRA resumes collection work
Since October 2022, the CRA has resumed collections, which had previously been suspended due to the pandemic. During the pandemic, the CRA and its lax standards provided tens of billions of dollars in pandemic subsidies to individuals.
However, the temporary relief for debt collection does not suspend debt interest, which means that for many Canadians, debt will grow exponentially if they don't pay attention to the taxes they owe.
Bell said that if people are not contacted by the tax authorities, a lot of people will not be proactive. They will only let the debt grow.
Nina Loussoupova, a spokeswoman for the CRA, said that "a small number of tax returns are randomly selected for review" and that "who is reviewed" is based on a risk scoring system.
However, the CRA also pledged to "commit to providing a person-centred, compassionate approach to all Canadians and working with individuals in need to deal with their situations."
How the CRA works
Typically, Bell said, it is the CRA's policy to scrutinize tax returns only for 3 years after the initial assessment date.
"If they contact you during that time, they don't immediately re-evaluate you, but ask you some questions," he explained, adding that the process can range from a few exploratory inquiries to a long and lengthy audit.
If you do receive a notice of reassessment and are added to the additional debt on your income tax return, you can file a notice of objection with the CRA, Bell explains. This will suspend the CRA's debt collection process and provide you with the opportunity to reduce or eliminate any debt that may have been added in error.
However, Bell cautioned that this would not suspend the accumulation of interest on the debt. Therefore, the safest solution is to try to pay the arrears as required, even if there is an objection to the audit, so that the accumulation of interest can be suspended. In order to be successful in the subsequent challenge, the CRA will refund the payment.
Once the CRA identifies your debt, it won't reduce that amount even if you can't pay it. However, Bell said taxpayers can apply to the CRA for reduced penalties and interest on their tax debt.
In addition to filing bankruptcy or insolvency, "some people can't pay off this debt in one lifetime, or even in the next." That's the reality," he added.
Tax filing is complex
The fundamental problem, Isufaj said, is that tax filings are complex, especially as more and more Canadians choose to work as freelancers or contractors.
She hopes to see the CRA make "major reforms" of the tax system to make it easier for taxpayers to file and pay taxes. Otherwise, "we all have to work with tax professionals." Because it's impossible to solve these problems on your own."