Tax emergency in Canada
December 20, 2013 8:15 AM Subscribe
A disabled relative is having all the money automatically taken out of her account by the Canada Revenue Agency (CRA). She doesn't owe taxes (all she has to do is file and they will give the money back) but this will take many months. What can we do?
The situation:
This is in Ontario, Canada.
A close relative has not filed taxes since 2008. She didn't think this was a big deal, as her work deducted much more from her pay than she owed in tax, so upon filing she would get a substantial refund. She lives on her own with a disabled child for whom she is the sole caregiver (and has been through this entire period).
Almost a year ago she had a major stroke which laid her low for several months and left her unable to speak. She is slowly recovering her power of speech, but is unable to use a telephone. While she is not well enough, yet, to go back to work, she is back living on her own and caring for the kid and living on disability insurance. She is, needless to say, fiercely independent (to a fault).
Some time after the stroke, she received notice that the CRA thought that she owed a large sum in tax (more than all the money she has and all the money we have put together) and that they would begin to seize her bank accounts if she didn't file. She was completely unable to deal with the issue at the time, but she didn't tell us because "she didn't want us to worry".
This has now transpired, and we are indeed worried. All the money from her accounts is gone, and any money put into the accounts will also disappear. She has $200 cash, a credit card and a cheque from her insurance company that she can't put into the bank.
Filing her back taxes is straightforward: her accumulated pay deductions and deductions for being the caregiver to a disabled child are more than enough to cover the debt to the government.
However, especially with the Christmas holiday, it will take months for the CRA to do anything about this. In the mean time she will have months of rent and bills to pay, food to buy, etc.
We have some money: not much, but enough to live on for a few months. If we could get the CRA to stop taking the money out of her account, this would allow us to stabilise the situation. This is, at present, our top priority.
We would very much value any general advice, but we also have some specific questions:
1. If we begin to pay her bills and/or receive money from her insurance cheques, will the government decide that our accounts are linked to hers, and will this have consequences?
1a. What about if we gave her access to our bank accounts directly?
2. What would be the broader legal consequences of us giving her money for short term support until the tax thing is sorted out?
3. What is the quickest way to get the CRA to stop taking money out of her accounts? (on the theory that then we can just give her the money she needs)
4. Is there some emergency support organisation that we can turn to in order to get advice and/or help?
5. Are we missing something obvious?
The situation:
This is in Ontario, Canada.
A close relative has not filed taxes since 2008. She didn't think this was a big deal, as her work deducted much more from her pay than she owed in tax, so upon filing she would get a substantial refund. She lives on her own with a disabled child for whom she is the sole caregiver (and has been through this entire period).
Almost a year ago she had a major stroke which laid her low for several months and left her unable to speak. She is slowly recovering her power of speech, but is unable to use a telephone. While she is not well enough, yet, to go back to work, she is back living on her own and caring for the kid and living on disability insurance. She is, needless to say, fiercely independent (to a fault).
Some time after the stroke, she received notice that the CRA thought that she owed a large sum in tax (more than all the money she has and all the money we have put together) and that they would begin to seize her bank accounts if she didn't file. She was completely unable to deal with the issue at the time, but she didn't tell us because "she didn't want us to worry".
This has now transpired, and we are indeed worried. All the money from her accounts is gone, and any money put into the accounts will also disappear. She has $200 cash, a credit card and a cheque from her insurance company that she can't put into the bank.
Filing her back taxes is straightforward: her accumulated pay deductions and deductions for being the caregiver to a disabled child are more than enough to cover the debt to the government.
However, especially with the Christmas holiday, it will take months for the CRA to do anything about this. In the mean time she will have months of rent and bills to pay, food to buy, etc.
We have some money: not much, but enough to live on for a few months. If we could get the CRA to stop taking the money out of her account, this would allow us to stabilise the situation. This is, at present, our top priority.
We would very much value any general advice, but we also have some specific questions:
1. If we begin to pay her bills and/or receive money from her insurance cheques, will the government decide that our accounts are linked to hers, and will this have consequences?
1a. What about if we gave her access to our bank accounts directly?
2. What would be the broader legal consequences of us giving her money for short term support until the tax thing is sorted out?
3. What is the quickest way to get the CRA to stop taking money out of her accounts? (on the theory that then we can just give her the money she needs)
4. Is there some emergency support organisation that we can turn to in order to get advice and/or help?
5. Are we missing something obvious?
Well, it might be worth paying the $3 fee to cash cheques at Money Mart or the like right now. And I would call the MP and ask for help.
posted by Chaussette and the Pussy Cats at 8:23 AM on December 20, 2013
posted by Chaussette and the Pussy Cats at 8:23 AM on December 20, 2013
Although the CRA will likely take a long time to amend the situation as you pointed out, I think calling them to discuss the situation might help clear a few things up and get you some answers, and maybe a timeline. This will probably not help in the short-term (contacting your MP is probably the best bet for short-term help) but might take some of the long-term stress away. I've had to call the CRA a few times and have always found them helpful and pleasant, for what it's worth.
posted by gursky at 8:33 AM on December 20, 2013 [1 favorite]
posted by gursky at 8:33 AM on December 20, 2013 [1 favorite]
Has she/you actually called the CRA and discussed this with them? That would be my first step. Ignoring a purported tax debt is the worst thing you can do. Calling and explaining that you think the notice is in error and that you're submitting the past due returns will likely get this resolved in the short term (or at least they'll give you information on formal procedures you have to do to get it resolved).
Also look into whether there is a provision for exempt assets in the jurisdiction's rules about garnishing bank accounts (e.g., in the US social security deposited into a bank account is generally exempt from seizure).
If necessary, cash the checks rather than depositing them in the bank account.
>she received notice that the CRA thought that she owed a large sum in tax
Granted I deal with US taxes, not Canadian taxes, but I'm curious as to what theory they're using to justify this tax debt. In the US, this can happen with stock sales, because only the sale price and not the actual gain/loss is reported to the IRS. But there's no indication of that in the question. If the CRA gets an equivalent of a W-2 from her employer (report of income and taxes withheld), then they should be able to calculate more or less accurately whether she owes a substantial tax liability. Maybe there's an issue of identity theft here as well? Or clerical error? This just seems a bit off to me.
posted by melissasaurus at 8:42 AM on December 20, 2013 [1 favorite]
Also look into whether there is a provision for exempt assets in the jurisdiction's rules about garnishing bank accounts (e.g., in the US social security deposited into a bank account is generally exempt from seizure).
If necessary, cash the checks rather than depositing them in the bank account.
>she received notice that the CRA thought that she owed a large sum in tax
Granted I deal with US taxes, not Canadian taxes, but I'm curious as to what theory they're using to justify this tax debt. In the US, this can happen with stock sales, because only the sale price and not the actual gain/loss is reported to the IRS. But there's no indication of that in the question. If the CRA gets an equivalent of a W-2 from her employer (report of income and taxes withheld), then they should be able to calculate more or less accurately whether she owes a substantial tax liability. Maybe there's an issue of identity theft here as well? Or clerical error? This just seems a bit off to me.
posted by melissasaurus at 8:42 AM on December 20, 2013 [1 favorite]
I agree that this needs more investigating. I once worked for a shady employer who deducted taxes from our paychecks, but did not actually pay those taxes to the government. Is it at all possible that this may be the case for your relative?
posted by nacho fries at 9:09 AM on December 20, 2013 [2 favorites]
posted by nacho fries at 9:09 AM on December 20, 2013 [2 favorites]
Call CRA. The staff are really nice and want to help. Ask what documentation do they want RIGHT NOW to get the hold on her account lifted.
Have her call and identify herself and then authorize them to speak to you (or another family member). It sounds like this has been overwhelming for her.
posted by saucysault at 9:27 AM on December 20, 2013
Have her call and identify herself and then authorize them to speak to you (or another family member). It sounds like this has been overwhelming for her.
posted by saucysault at 9:27 AM on December 20, 2013
Best answer: I am not a tax lawyer, don't know the details, but am familiar with this situation.
Looks like she was arbitrarily assessed for the unfiled returns, basically CRA saying you didn't file, so we will file the returns for you. If this is so, the ARB would not necessarily take into consideration any credits she is entitled to, so the amount would be way above what she owes. This is CRA's way of forcing you to file.
If CRA issued a garnishee on her bank account, she would have received a copy of the garnishee. Included on the garnishee would be a contact name and phone of the officer who issued it. Call them, and they can remove the garnishee almost immediately, if they feel it is warranted.
To remove it, she must, at a MINIMUM, promise to file her returns. Once the returns are filed, the ARBS will be reversed, and if she is owed anything, CRA will gladly refund the money.
There is also a program called "Taxpayer Relief", where all or part of penalty and interest can be waive, look it up on the CRA website.
posted by BozoBurgerBonanza at 9:51 AM on December 20, 2013 [8 favorites]
Looks like she was arbitrarily assessed for the unfiled returns, basically CRA saying you didn't file, so we will file the returns for you. If this is so, the ARB would not necessarily take into consideration any credits she is entitled to, so the amount would be way above what she owes. This is CRA's way of forcing you to file.
If CRA issued a garnishee on her bank account, she would have received a copy of the garnishee. Included on the garnishee would be a contact name and phone of the officer who issued it. Call them, and they can remove the garnishee almost immediately, if they feel it is warranted.
To remove it, she must, at a MINIMUM, promise to file her returns. Once the returns are filed, the ARBS will be reversed, and if she is owed anything, CRA will gladly refund the money.
There is also a program called "Taxpayer Relief", where all or part of penalty and interest can be waive, look it up on the CRA website.
posted by BozoBurgerBonanza at 9:51 AM on December 20, 2013 [8 favorites]
All of the above. And especially contact a CPA right now. They know the law, they know what to do. H&R Block is open year round and can efile, which is a very fast turnaround from CRA (unless they won't let her efile for some reason?)
For the cheque, as suggested above, Money Mart is the least bad option. I have no idea if the CRA would look dimly upon this, however. Same answer if she signs the cheque over to you and you give her the cash. Can you float the cash to cover the cheque, and she pays you back once you have answers to those questions?
posted by feckless fecal fear mongering at 10:19 AM on December 20, 2013
For the cheque, as suggested above, Money Mart is the least bad option. I have no idea if the CRA would look dimly upon this, however. Same answer if she signs the cheque over to you and you give her the cash. Can you float the cash to cover the cheque, and she pays you back once you have answers to those questions?
posted by feckless fecal fear mongering at 10:19 AM on December 20, 2013
Response by poster: Thanks, everybody, for your very thoughtful and knowledgable advice.
Quick update:
We have found the notice that BozoBurgerBonanza wrote about and left a message with the CRA person. We have also left a message with the MP's office. I didn't have any luck calling the CRA directly (it looks like their general enquiry lines are down or clogged). Relative and and Relative's Helper have also been to speak to a proper accountant, who has put all the paperwork in order. Relative's Helper will courier the outstanding tax filings out today.
For future reference, the accountant had the following advice: we can pay Relative's bills and rent no problem, and we can give her money. We should not, on the other hand, receive any money from her (such as her insurance cheque), as that might be dodgy in the eyes of the government.
So now we wait and see if we can get hold of any of these people. Given that it's the Friday before Christmas, it might be a while before we can actually talk to anybody. But it looks like we might end up having this problem with the bank accounts being garnished for a couple of weeks, which is perfectly manageable, rather than the months and months we feared. As for when Relative gets her money back... well we'll have to wait and see. But that's a problem for another day.
Thanks again, everybody!
posted by Dreadnought at 11:06 AM on December 20, 2013 [2 favorites]
Quick update:
We have found the notice that BozoBurgerBonanza wrote about and left a message with the CRA person. We have also left a message with the MP's office. I didn't have any luck calling the CRA directly (it looks like their general enquiry lines are down or clogged). Relative and and Relative's Helper have also been to speak to a proper accountant, who has put all the paperwork in order. Relative's Helper will courier the outstanding tax filings out today.
For future reference, the accountant had the following advice: we can pay Relative's bills and rent no problem, and we can give her money. We should not, on the other hand, receive any money from her (such as her insurance cheque), as that might be dodgy in the eyes of the government.
So now we wait and see if we can get hold of any of these people. Given that it's the Friday before Christmas, it might be a while before we can actually talk to anybody. But it looks like we might end up having this problem with the bank accounts being garnished for a couple of weeks, which is perfectly manageable, rather than the months and months we feared. As for when Relative gets her money back... well we'll have to wait and see. But that's a problem for another day.
Thanks again, everybody!
posted by Dreadnought at 11:06 AM on December 20, 2013 [2 favorites]
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posted by kmennie at 8:19 AM on December 20, 2013 [6 favorites]