As a trustee or executor of an estate, you may find yourself managing existing or future tax disputes with the Canada Revenue Agency (“CRA”) and the collections department of the CRA at the same time.
In a blog written by Peter Aprile of Countertax Lawyers entitled the Canada Revenue Agency Collection Department & Paying Tax Debts in dispute, some issues and related myths were addressed which you may find useful to know:
1. Your decision to have the estate pay, or not pay an outstanding tax debt in dispute has no bearing on the estate’s success or failure in settling the dispute.
2. Under the provisions of the Income Tax Act, CRA’s ability to collect certain tax debts is restricted when you have objected or appealed the assessment or re-assessment. Nevertheless those restrictions could be lifted if CRA can demonstrate a delay will put collection at risk.
3. CRA charges interest at the current prescribed rate (currently 5% – ouch) from the day that the return (on which the dispute arises) was due.
4. CRA will pay refund interest (currently 3%) from the day the amount in dispute was paid and subsequently reduced in whole or in part when resolved.
5. Transferring assets out of the estate in an attempt to defeat CRA’s ability to collect is not a good idea.
The author also noted that when dealing with the CRA collections department, it is best to do so personally and effectively. This way you are not wasting money on your professionals who then can stay focused on helping you resolve the dispute at hand.
Thanks for reading