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Do you owe money to the Canada Revenue Agency (CRA)?

taxYou may have received a letter from the CRA advising you of an unpaid tax amount and it will speak of “legal actions” to come if you do not call and arrange a repayment. The types of legal action that CRA may take are varied and the letter will warn that these legal actions may be taken without further notice.

What you may not be aware of that the Canada Revenue Agency has a powerful set of collection tools at its disposal if you fail to pay unpaid taxes. These tools include a range of recovery devices like garnishments, seizure & sale of your property, third party assessments and in 1999, the CRA also gained the ability to certify your debt in Federal Court and then register your tax debts against your assets. The registration of these tax debts against your real and personal property effectively creates a charge or security interest in your assets.

It’s worth knowing too that the CRA may register against your real and personal property whenever your tax debt exceeds a specific threshold dollar amount (as low as $10,000) and/or whenever your repayment will take an extended period of time. In many such cases the CRA does not notify you of the registration and you will be unaware of the registration until you attempt to refinance, sell/dispose of the asset that has become encumbered by CRA. Once CRA registers a lien or security interest against your property it then becomes a secured creditor that expects full payment before it will release your asset.

This change from unsecured creditor to secured creditor may effectively prevent you from resolving those tax type debts in either a bankruptcy or proposal administration. To find out if the CRA has registered against any of your assets, you can contact the CRA directly or go to a Service Ontario office nearest you.

To sum up, if you have a large tax debt or know that you are about to be assessed a significant tax liability you may wish to urgently consult with a tax attorney and/or a Licensed Insolvency Trustee to discuss and review your options.

What is “Director’s Liability?”

I put my life and savings into my incorporated business and it failed.  Now the tax Agency says I owe for something called Director Liability? I have no money or assets to pay such a debt…what can I do?

This is a fairly common scenario.  Simply stated, Director’s Liability is the liability that can be created against a director(s) in situations where the corporation that he or she directed, failed to pay or remit such taxes as net sales tax, GST/HST amounts collected and payroll source deductions taken. The Canada Revenue Agency and other tax authorities by way of the legislation that they administer views the director(s) as the person(s) responsible to ensure that these monies are sent to the tax authority by their corporations; when they are not, they can be held jointly, severally and solely responsible for the remitting of these amounts.

Your situation may be unique and generally speaking if you lack the ability or resources to pay these amounts immediately or in the future, they do not assess you or make your liable.  If they do decide to make you as a director liable, they will need to take specific steps to do that.

As for your options, these type of liabilities can usually be addressed in a bankruptcy filing or a proposal made under the Bankruptcy and Insolvency Act.  It is best if you promptly seek the guidance and advice of a Licensed Insolvency Trustee in these situations as the Trustee is best able to explain and assist your options.