By: Grant Gilmour
Facts:
On April 11, 2013 Canada Revenue Agency (CRA) announced that they will phase out federal government cheques by April 2016. From that date all refunds issued to Canadian tax payers will be via direct deposit.
Discussion:
The use of direct deposit is not a new process. CRA and many other institutions have been using this process for a number of years. The important issue here is what this means to the Canadian taxpayer. By issuing cheques, the control over a bank account remains to a certain extent in the hands of the taxpayer. By depositing a cheque you are keeping a lot of your bank details out of the hands of the payor. As soon as you give CRA your bank details you are effectively handing them access to your bank account. CRA then have the ability to retrieve money from your bank account as easily as they can deposit money into it. All CRA would have to do is certify any debt they believe you owe them in the federal court and then issue your bank branch a Third Party Requirement To Pay (RTP). Often the money is then removed quickly from the bank account before you have been advised or even aware of the action.
By only processing transactions via direct deposits, this ensures that CRA would have all the necessary bank details of all taxpayers on hand. This will allow them easier access to your bank account than before. Currently if you have only paid your taxes by cheque the amount of information available is limited to what is on the cheque and that information is unlikely to be stored in an accessible format within CRA. Providing them electronic data allows CRA to easily build and populate a database that can access your information efficiently.
We recommend that whenever you are dealing with payments or deposits with CRA that you are doing so with one bank account that is not your main account and is at a different financial institution. This will limit the amount of funds at risk. CRA will only be able to get access to the bank accounts they know about. If you have an account in a different bank that they have never had any dealings with then it is more likely that they will be unable to access those funds.
Recommendation:
If you would like to discuss any matters when dealing with CRA, please contact us at Gilmour Knotts, Chartered Accountants.
Grant Gilmour B.SC. MBA, CPA, CA is the International Tax Partner of Gilmour Knotts Chartered Accountant. To connect with Grant visit: www.gilmour.ca
