Every day, the Canada Revenue Agency (and Internal Revenue Service in the USA) makes requests and demands for information from individuals and business owners alike requiring them to make disclosures about all matters of financial importance that affect them or other third parties. Sometimes these are mere administrative requests for clerical data to clarify employment records and tax remittances, while others may be outright demands for invoices and evidence that may be used against the business owner, an employee, a customer, or other supplier. Often times these are phishing expeditions to help the taxing authority build a case against someone else or to incriminate the business owner or individual directly. Often times, these can be total scams by call centres in India or sophisticated domestic scammers who even spoof the CRA phone number and call display.
Regardless of the demand or request, and the reasons given for it, the CRA (I will use this going forward but it also means the IRS in the USA) must follow the law like anyone else in order to obtain such information. Just because someone in authority makes a request or demand of you, it doesn't mean that you need to automatically comply. You are fully within your rights to say "request denied!" If I demanded a million dollars from you, would you just hand it over? What if I said I was from the CRA, would you THEN hand it over? What if I further threatened to audit you, make you life miserable, or throw you in jail for conspiracy if you don't turn it over? Don't laugh; this is the exact kind of tactics employed by unscrupulous abusive agents and con artists alike!
There is a legal due process that must be followed by any agency, lawyer, creditor, or other party so as to avoid violations of the basic protections afforded us in the Canada Act and the Charter of Rights and Freedoms. There are numerous acts of parliament which also come into play such as the Income Tax Act and the Privacy Act. There is also the Criminal Code that must be adhered to in the administration of fair justice.
In addition, citizens must be constantly aware of the many CRA impersonation and telemarketing scams that rely on the fact that people are automatically in fear of the CRA, or anyone claiming to work for the CRA, right at the outset of an unexpected phone call received out of the blue. Some scammers even send official looking documents in advance of the call to make it SEEM legitimate when they do call.
In this article I will discuss the procedures that should be followed in response to such demands so as to verify the CRA's claims, jurisdiction, and legal rights to demand anything from the call recipient.
Proof of identity must first be established by the agent claiming to be from the CRA. With the number of identity scams and fake CRA calls occurring today, it is critical that businesses and individuals follow a severe due diligence protocol to verify the status of anyone claiming to be from the CRA. This letter can be used by anyone receiving demands for information from someone claiming to be from the CRA. In summary:
Verification must be received in writing, signed by an agent with his or her full name, position, badge number, and proof of legal status with CRA. - Discuss your proof-of-identity concerns with the caller in light of the privacy laws and the numerous recent telemarketing scams that have been widely publicised. Explain that you require this proof before engaging further in discussion or complying with any requests. If the caller refuses to comply, politely say goodbye and hang up!
The CRA information request or demand letter must be sent by registered mail from the CRA (with a return address and proof of sender) and signed by the sender personally, and by the recipient before moving to step 2. Failure to verify the identity of a CRA requester will open up the recipient to a violation of the Canadian Privacy Act which is a serious breach of privacy if personal information is disclosed without due process. Severe fines, civil contract breach, and criminal charges against the disclosing person can result from failure to protect critical personal information such as taxpayer records or business invoices, without the consent of the parties being disclosed upon.
Once the CRA identity has been properly established, the business or third party receiving the disclosure request is under an obligation to further have the CRA prove its legal standing to request said information. This requires proof of judgment from a court of competent jurisdiction and /or a subpoena compelling the discloser to provide the information. Threats and intimidation tactics from the CRA agent against a person or business owner, which can be expected, is nothing but an intimidation tactic designed to coerce the discloser into providing the information illegally, and is NOT legal justification to compel disclosure without the written consent of ALL affected parties to the disclosure, and without a court order or judgment to that effect. That means anyone named in the request, such as the taxpayer directly being effected, or any third parties such as clients, suppliers, and even billing agents (such as credit card processors, advisors, accountants, or billing agents who handled intermediary transactions) must also consent to the disclosure. Failure to prove legal standing through court-ordered documents will open up the discloser to severe legal repercussions for damages and costs arising from that disclosure of unauthorized private communications. Remember, all correspondence must be in writing in case those demands and orders are ever needed in court proceedings. CRA requesters should not have an issue with this provided their requests are legal. If they are not legal and lawful requests, they will not agree to documenting these demands for fear of being held to account. HOLD THEM TO ACCOUNT. They are public servants and must act within the law. Don't let fear and intimidation, or threats of an audit for not complying, deter you from insisting on due process. Understand that they hope to settle their investigations quickly and want to avoid extra paperwork that holds them accountable for any unlawful or illegal acts. Document and record all interactions with CRA and let them know that you are doing so, upfront. That will force them to be on their best behavior!
Assuming the above burden of proof has been met, the business owner or individual may set an administrative fee to process the request. I recommend that the fee be at least $500 to cover the potential time consuming and distractive work of researching archives looking for information that may or may not still be accessible. There is an opportunity cost in business to dedicate resources to such a task, and the business owner is entitled to recoup his costs of such an inconvenience. For individuals, a nominal $100 may be more appropriate. The point is this: time is valuable and must be compensated for in some way. ANY amount of payment for this clerical service, even $1, involves a contract with the CRA which can have severe adverse effects against them if the law is not followed to the letter. Demand some amount of administrative payment for your compliance unless presented with a court order signed by a judge compelling you to do so. (By the way, the CRA is nothing but a potential unsecured creditor who happens to be in collusion with the banks and parliament, and uses the official sounding name of Canada Revenue Agency. They are really a private international foreign corporation collecting interest payments for the international bankers which they have deceptively attached to the income tax act to collect money or revenue from corporations. This involves contracts which requires consent and a meeting of the minds. But I digress.)
Should you decide that everything is in order and that the request or demand is legally compelling you to do so, make copies of everything sent and send it registered mail (C.O.D. if possible) direct to the agent involved with demand for signature and ID on the registered mail. This will ensure that the agent in question did receive the correspondence directly and it holds him or her accountable if there are legal ramifications from those affected by your disclosure.
If you follow these procedures you will minimize your risk of being scammed or violating the Privacy Act, and you may mitigate your damages from a lawsuit resulting from your forced disclosure of sensitive private information about yourself and others. Above all, remain polite and respectful of the caller or agent so as not to inflame the situation further. And don't forget to record and document everything for your protection! You never know when you may need it for your defence or for that of the affected parties.