Tasked with the collection of billions of dollars of taxes each year, the CRA employs a large number of full-time collections officers.
Not everybody who owes taxes is assigned to a collections officer. There is an algorithm in the CRA computer which determines if and when to assign a human collector rather than to send collections letters.
A piece of advice that I give all of my clients is that once they know that there is going to be a tax debt, regardless of whether it is collectible yet or even assessed, they should start making payments. And if they have a debt which will be $10,000 when they file, if they can only afford to pay $1000 per month, I recommend that they send in those payments by post-dated cheque.
The fact is that if enough of the payments clear, and if the computer is happy with the size and frequency of the payments while considering the size of the debt, the taxpayer will not be bugged by a human collector. Statements of account will continue to be sent to the taxpayer on a regular basis, but they will not be called, bugged, or otherwise threatened when the computer is happy.
So keep the computer happy. Happy computer, happy taxpayer.
Being into my second decade of being a tax lawyer at this point, I reflect upon the fact that a very large portion of the 25,000 plus individuals who have consulted with me have had issues with the collections department. Collections action looming over one’s head like the sword of Damocles is a constant source of stress and frustration for business owners who owe money to the CRA. With this type of stress business suffers, relationships suffer, and I have heard of people becoming physically ill as a result.
With that in mind, it is important to ensure that you understand the collector and the collections department and their procedures. In the case that your business is a target of collections it is important to understand the collections procedures and your rights. It is also important to understand that there is no shame in consulting a professional. I tell people that I am a cross between a tax lawyer and a hostage negotiator. My firm has arranged hundreds of millions of dollars of payment plans. One way or another we usually make a deal that is amenable to both collector and taxpayer without anybody getting hurt in the process. We usually start by listening to the CRA’s demands and then we send in a few pizzas so they aren’t being irrational, negotiating on an empty stomach. The rest is a trade secret. But at the end of the day a successful payment plan is arranged by providing proper financial disclosure and offering to pay as much as one reasonably can on a monthly basis.
In order to give taxpayers time to file their objection, CRA debts become subject to collections action 90 days after the date of assessment or reassessment and collections action is typically not taken beforehand. However for taxpayers with a poor history there is a possibility that a collector will be assigned during this period.
After the notice of assessment or reassessment is issued, the CRA will send a general collections letter and the call centre will follow up with a quick call typically after 45 days.
It is important to remember not to ignore the CRA letters and calls. The CRA is like an angry lover. Ignoring them only makes this worse for you and more difficult to manage in the future.
Sometimes the computer isn’t so happy with the taxpayer but is not so unhappy that it has assigned a collections officer yet. In these cases a call is scheduled through the CRA’s national collections call centre by a random agent. This typically happens about 45 days after an assessment has been made without any payments. It is the agent’s job to make a payment arrangement and encourage payment within 30 days, but they are not assigned to the file and they will not take any collections action against the taxpayer.
It is routine for the collectors to accept payment plans of up to 12 months, and I suspect that once the CRA is up and running at full speed after the COVID-19 situation that these agents (and other collectors) are going to be a little more lenient for the next little while.
The problem with an arrangement made through a telephone agent is that should a collector be assigned to the file at some point thereafter, that particular collections officer does not have to respect the arrangement. That being said, if a taxpayer respects the terms arrangement made on the phone there hopefully will be no need for a collections officer to be assigned in the first place.
The Collections Officer
It is important to know who you are up against. And when a taxpayer owes money to the CRA they have to deal with a collections officer. And when the money owed to the CRA is either a larger amount or it involves trust monies you can expect that the collections officer is going to mean business.
Not to knock the collections officers, but here is a general rundown of who the kind of individual you are typically dealing with. And yes, I paint them all with the same brush, and of course there are exceptions. But here is a profile of your typical collections officer:
Many collections officers have at least some post-secondary education, although they are not required to. Some have university degrees and many have community college certificates. Often times collectors start at the CRA at a young age and may have experience in other departments which pre-dates their tenure in the collections department. While many are pleasant and easy to deal with, the majority are not. A great number of them seem to have let their discretionary powers get to their heads, and many of them do not treat taxpayers with the courtesy and respect that they are guaranteed under the Taxpayer Bill of Rights.
The typical collector:
- Is not highly educated
- Is often a student or contract worker
- Is not knowledgeable about business
- Is not rewarded with commission or bonuses unlike private sector collectors. What matters to them is closing files – regardless of whether funds are collected from the taxpayer.
- Does not have to respect arrangements with prior collectors
- Is paid $53,614 average annual salary – 48% above National average (Indeed.com)
- Has no collections quota
- Meets the following minimum education standard (per job posting): High school diploma, or alternative approved by the CRA
- Has passed the General Competency Test: Level 1 (GCT1-207) Pass mark : 30/50
For fun, See: https://ca.indeed.com/salaries/Collection-Agent-Salaries-at-Canada-Revenue-Agency?preFilter=1 for a job posting.
The General Competency Test
In order to become a collector, one must pass the General Competency Test Level 1 with a mark of 30/50.
The General Competency Test: Level 1 (GCT1) consists of 50 multiple-choice questions. There are three types of questions:
- Understanding Written Material;
- Solving Numerical Problems; and
- Drawing Logical Conclusions.
The GCT1 takes about one hour and 45 minutes to write, including time for administrative purposes.
When the test is used for screening purposes, the minimum pass mark is 18/50. Managers can use a higher cut-off score depending on the level of ability required for the position.
CRA Collection Powers
The CRA Collections Agent is provided with an arsenal of very impressive collections powers, and they use them regularly.
Many business owners find CRA collections officers bewildering because they behave so differently from their private sector counterparts.
The source of the issue is that collections officers are not incentivized by the collection of money as are private sector collectors. It is baffling and absolutely counter-intuitive. Somewhere up the chain of command in the CRA are people who care about revenue collections. For some reason though, there is a disconnect and this desire to collect taxes has not trickled down to the collectors themselves. Instead of being incentivized to collect revenue, the CRA collector is rewarded by closing files. The more files they close (even if the file closure results from the company being forced into bankruptcy by the collector) the better their performance evaluation. The more bankruptcies the more closed files and the better the collector’s (file closure) numbers.
And in order to close files as quickly as possible collectors use their awesome powers which include:
- Director’s liability Assessments
- Non-arm’s Length Transfer Assessments
- Garnisheeing wages
- Sending Requirements to Pay to Clients
- Freezing Bank Accounts
- Placing Liens on Property
- Seizure and Sale of Assets
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