The Canada Revenue Agency (CRA) can, and will, withhold tax refunds for a variety of reasons:
- Balance owing
- Missing Returns
- Related balance owing
- Anticipated balance owing (refund hold applied by CRA)
- Computer won’t allow the refund to be issued.
The CRA was established to for the purpose of administering and enforcing the Income Tax Act and the Excise Tax Act. That role includes; processing income tax returns (GST/HST returns, payroll deductions, and so much more), enforcing tax laws, and ensuring that taxes are charged applicably, returns are filed correctly, taxes are collected and verified.
This means that whether you owe the government money, or the government owes you, it is the CRA that will make that calculations, authorize the cheque, or take the steps to fix all the other issues so that the refund can be issued, applied to a previous balance owing or be set-off to a related debt.
Confirm You Really Owe the Money
If you filed your tax return, and the CRA issued a Notice of Assessment exactly as-filed, meaning that the amount of tax owing according to your tax return is the same as the Notice of Assessment, then it’s difficult to make the case that the CRA got the numbers wrong. If you did make a mistake on your return, and indicated that you had more taxable income than you really did, or fewer deductions or tax credits than you were entitled to, then you may want to file an amended tax return for that year with the correct numbers. The CRA may scrutinize the amended return.
If you have documents to back it up, the agency issues a new assessment, and any interest you owed on the portion of tax that was cancelled will also be cancelled.
Keep Collections Under Control
If you owe the CRA money, don’t wait to have your bank account frozen before reacting. Usually, the CRA assigns a collections officer to your file if you owe a significant some of money. Even if there is no officer assigned, you can call the CRA’s collections hotline at 1-888-863-8657 and work out payment arrangements. Arrangements usually involve making regular instalment payments.
If you need to make instalments over a period of longer than six months, the CRA will usually require financial disclosure and may put a lien on your property for security.
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