If you haven't received your tax refund in Canada, one possible reason could be the Canada Revenue Agency’s (CRA) Debt Recovery Program. This program allows the CRA to offset tax refunds and other credits against debts you owe to federal, provincial, or territorial government programs.
CRA debt recovery activities may impact upcoming benefit, credit, and refund payments. The Canada Revenue Agency (CRA) has resumed efforts to recover taxpayers' debt. One of the tools the CRA uses to recover debt is called offsetting.
Understanding the Debt Recovery Program
In early April 2024, the Canada Revenue Agency (CRA) announced that it resuming efforts to recover taxpayer debt via “offsetting.”
Purpose: The Debt Recovery Program is designed to help various government departments recover outstanding debts by redirecting tax refunds and other payments you may be entitled to.
Offsetting is when the CRA proactively applies tax refunds and benefit payments to a taxpayer’s debts rather than paying them as they typically would. In May 2020, the CRA proactively paused most offset mechanisms in response to the COVID-19 pandemic. The pause was a temporary measure, like other COVID-19 relief tactics, to support taxpayers during a challenging time. The offsetting practice resumed in 2023.
Offsetting is a standard operating procedure that was used pre-pandemic by the CRA to collect outstanding taxpayer debt.
Types of Debts Covered:
The program covers a range of debts, including:
- Overpayments of Employment Insurance (EI) benefits
- Canada Student Loans
- Provincial social assistance overpayments
- Old Age Security (OAS) and Canada Pension Plan (CPP) overpayments
- Other federal or provincial government program debts
How Debt Recovery Program Works?
- Debt Identification: When you file your tax return, the CRA reviews its records to identify any outstanding debts you owe to other government programs.
- Offset Process: If any such debts are found, the CRA can use your tax refund or other credits (e.g., GST/HST credits, Canada Child Benefit) to offset these amounts.
- Notification: The CRA typically sends a Notice of Assessment or a separate letter explaining that your refund has been applied to an outstanding debt, including details about the debt and the remaining amount owed, if any.
What is the CRA’s Refund Timeline?
A commonly asked question is “How long after notice of assessment do you get a tax refund?”
A notice of assessment (NOA), is provided by the Canada Revenue Agency and it contains details of how much your income tax refund will be or how much tax you owe.
NOA’s and tax refunds are typically sent out two weeks after your tax return has been filed online. This can take up to eight weeks if you file your tax return by mail.
Non-resident tax returns for those living outside of Canada can take up to 16 weeks. If your tax return is flagged for an in-depth review, it may take longer.
A detailed review could be triggered because you were randomly selected for an additional review or because items on your return may require more scrutiny (for instance, the information on your return doesn’t match other sources like your T4 slips, the types of deductions, or credits you claimed require verification, or you have a history of non-compliance).
Once you get your notice of assessment, however, your tax return could still be under reassessment at any time during the next 6 years based on investigations being conducted by the CRA.
How Can I Check My Tax Refund Status in Canada?
The CRA advises that you wait 8 weeks before contacting them for an update on your tax return.
To check the status of your tax refund, log into your "My CRA" account, or talk to a CRA representative by calling 1-800-959-1956. Be ready to provide the following details:
- Your name and date of birth
- Address
- Social insurance number
- Line 150 from your most recent tax assessment
Why is My Tax Refund Delayed?
There may be many reasons why your tax refund may be delayed.
Firstly, the delay could be caused by incorrect personal details, such as your address, etc. which may slow down the process of receiving your tax refund.
If you filed your tax return after the tax deadline on 30 April this could also lead to a delay in receiving your refund.
If you file under the wrong tax residency status this will also be a factor that will delay your refund getting to your bank account. It is important when filing your tax return to include all of the correct information and this will help to ensure the CRA processes your documents as efficiently as possible.
It is best to file your tax return as early as possible before the tax deadline, this can help to reduce the time you have to wait to receive your tax refund, and you will avoid any penalties or fees imposed by the CRA for filing after the deadline.
Depending on what way you signed up to receive your tax refund, this could increase the time you are waiting to receive it. For instance, if your refund is being deposited directly into your bank account this is typically a quicker process than paper cheques.
Why You Might Not Have Gotten Your Tax Refund
The CRA lists several reasons why taxpayers might not get their refund even though they’re owed one. As per the CRA debt recovery program—which looks to “offset” debt taxpayers owe by withholding tax refunds or benefits like GST/HST payments—many delays involve outstanding government debt.
Here are some other reasons you may not receive your refund:
- Outstanding GST/HST returns from a sole proprietorship or partnership
- A garnishment order via the Family Orders and Agreements Enforcement Assistant Act
- Certain kinds of outstanding federal, provincial, or territorial debts, such as student loans, social assistance benefit overpayments, immigration loans, training allowance overpayments, or employment insurance (EI) overpayments
- A return of $2 or less
- A miscalculation of your return that’s corrected through your notice of assessment
- Questions about your past tax returns
If the CRA has questions about your current or past tax returns, you must respond promptly and provide any additional information or paperwork requested. Otherwise, your return may be left pending indefinitely until it’s resolved (which means you won’t get your tax refund anytime soon).
Adjusting Your Tax Refund
To adjust your tax refund, you must adjust your income tax return. Once you receive your notice of assessment, you can adjust different lines in your return. You can do this for the past 10 years of returns.
If you filed your return online, you can adjust certain lines of your return either through MyAccount or through ReFile. If you filed your return by paper, you can mail in a completed Form T1-ADJ, T1 Adjustment Request along with all supporting documents.
Steps to Take If You Haven't Received Your Refund
1. Check Your CRA Account: Log into your CRA My Account online to check the status of your tax return and any notices or letters sent by the CRA. This can provide information about whether your refund was offset due to an outstanding debt.
2. Review Communications: Review any recent mail or email communications from the CRA. They may have sent notifications regarding the application of your refund to an outstanding debt.
3. Contact the CRA: If you need further clarification, contact the CRA directly. You can reach them by phone to inquire about the status of your tax refund and whether it was applied to a debt.
4. Understand Your Debts: If your refund was used to pay off a debt, make sure you understand the nature of the debt, the original amount, and how much has been paid off. This will help you manage your finances and plan for future tax refunds.
5. Resolve Outstanding Debts: If possible, resolve any outstanding debts to prevent future refunds from being used for debt recovery. Contact the relevant government agency to discuss payment plans or other arrangements if you're unable to pay the debt in full.
Additional Considerations
- Disputing Debts: If you believe there is an error or you dispute the debt that has been offset against your tax refund, contact the specific program or department responsible for the debt to address the issue.
- Impact on Benefits: Be aware that debts owed to certain programs can also affect other benefits and credits you receive from the government, not just your tax refund.
How Do I Resolve Issues with My Tax Refund Status?
Choosing the right course of action helps to ensure your issue gets resolved quicker, saving you time and money.
If you disagree with your CRA notice of assessment, you should call the CRA to better understand the nature of the issue and to help resolve it. After that, you can make a formal objection at any time within 90 days of the date on your NOA or reassessment.
To file a formal objection online, find the “File a formal dispute (Notice of Objection)” section of your CRA My Account. You can also file by mail using form T400A, Notice of Objection, or by writing the chief of appeals at your Appeals Intake Centre.
You must explain the reason for the objection, outline any relevant facts, and provide additional information or documentation. When preparing any materials to support your claim, add all relevant dates and details.
If the CRA is disputing multiple years of your returns, start by appealing the oldest return first and move forward.
How To Avoid Delays of My CRA Tax Refund in the Future?
Some other things you can do to avoid delays in your tax refund status in the future:
- File online:This reduces the timeline for receiving your notice of assessment from 8 weeks to 2 weeks.
- Ensure accuracy:Since inaccurate information could cause your return to be flagged for additional review, the information in your return must be correct.
- Keep your CRA information up-to-date:Make sure your address, phone number, name, and marital status are updated with the CRA.
- Sign up for direct deposit:You’ll get your refund faster if you sign up for direct deposit.
Does the CRA Charge Interest on Refunds?
Don’t fret if your return is held up: The CRA will pay you interest. If the CRA doesn’t issue your refund within 31 days of accepting your return, they owe you interest for each additional day. If you are eligible for interest, the CRA will automatically add any interest it owes you to your tax refund.
The CRA pays taxpayers monthly interest during the period they hold onto your refund if it’s later determined that it was owed to you all along. The good news is that the CRA’s interest in refunds is pretty generous:
- Interest on non-corporate taxpayer overpayments: 8% APR
- Interest on corporate taxpayer overpayments: 6% APR
The rates for CRA interest on refunds are updated quarterly.
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It is crucial to understand the CRA’s Debt Recovery Program and its impact on your tax refund. By staying informed and proactive, you can manage your finances more effectively and avoid surprises when expecting tax refunds or other government payments.
Dealing with tax refund issues seems complicated. We got you. Our expert accountants in Toronto will do the heavy lifting, so you don’t have to. You answer a few questions, and we’ll prepare your return with 100% accuracy. Feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step toward proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.