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Slightly more than $12,000 vanished last month from the bank account of a Toronto man we'll call Ted.

His fight to track the money down is a story of the power of the taxman, the complicity of banks and a reminder that no one will really look after your money except you. It's also a lesson on why you should be hypervigilant about your accounts in this age of digital banking and question any transactions that don't compute.

Ted, 33, noticed the $12,349.21 debit in his account while depositing some money and went to his bank for an explanation. "After about half an hour of them talking on the phone, they told me it was from the government for tax purposes," he said. "They basically said they couldn't tell me any more information."

Enter, the Canada Revenue Agency: After leaving a message requesting some help, Ted heard back from a representative of the CRA who started the conversation off on a surreal note.

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"She said, 'We've been trying to contact you for years now about this information,'" Ted recalled. "I said, 'I don't know what you're talking about. I've never been contacted.'"

The CRA rep replied by saying the matter was related to a business in a city in another province. Ted has never even visited that city, much less lived or run a business there.

And then, finally, a revelation. "Oh," Ted recalls the CRA rep saying, "it appears there's someone with the same name as you." (Protecting this other person's privacy is why we're not using Ted's real name here.)

The CRA does, in fact, have the power to take money out of your bank account to pay a tax debt you have ignored – they call this a requirement to pay. But it's your bank that actually does the withdrawal, using information supplied by the CRA.

In Ted's case, his bank did not ensure that it had the right person. "Two customers had certain personal identifying information that was the same," a spokesman for Ted's bank, Toronto-Dominion, explained in an e-mail.

Ted's first reaction on seeing the money gone from his account was to think it was identity theft. He happened to have a large balance in his account and the withdrawal the CRA requested was just a bit below that amount. It looked like someone was trying to clean him out without triggering any alarms caused by an overdraft.

Next, Ted wondered if he was somehow responsible. "You're thinking about every transaction you did in the past six months, right? Who did I give my card number to? I just started banking on my phone about a month ago – I thought it might be that."

Ted found the CRA to be helpful in figuring out what happened, but the bank was a tougher nut. "Once they learned it was a tax thing, they treated me like a borderline criminal: 'It's your tax issue, so it's up to you to figure out what the problem is.'"

TD has taken the high road since then.

"We did make a mistake, and we apologize for any inconvenience this may have caused our customer," the spokesman said. Ted says he was also offered $150 for his trouble by TD, which he accepted.

But he remains surprised that this case of mistaken identity could happen in the first place. He says he had recently arranged a mortgage with his bank, which means it would have familiarized itself with his personal details. Also, he wonders whether a simple check of social insurance numbers would have prevented the situation.

TD puts the situation down to human error. The spokesman said the bank is coaching staff to be sure they are following procedures for identifying customers.

As for the CRA, it says a requirement to pay is one of the ways it collects money from people who do not voluntarily pay their tax bills. Banks are given a requirement to pay document, which outlines the taxpayer's name, address and CRA account number. From there, the bank is responsible for withdrawing the money.

Ted's story shows that the system can break down, even with these checks and balances. So watch your bank accounts closely and question anything out of the ordinary. Mistakes do happen.

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THE REQUIREMENT TO PAY

What is it? A way for the Canada Revenue Agency to collect debts from taxpayers who do not voluntarily pay what they owe. If there is no response to phone calls or letters, CRA may use a requirement to pay.

How do they work? A notice is issued to an individual's financial institution, which then forwards the money from the client's account.

What if there's not enough in the account to cover the debt? The financial institution is required to immediately forward any available funds to the CRA. The requirement remains on the taxpayer's account until the amount owing is paid in full, expires or is withdrawn by the CRA. Until that time, any funds deposited into the account are directed to the CRA. The customer's bank account could be frozen during that period.

What steps are taken to ensure that money is taken from the right person? The CRA provides the financial institution with the taxpayer's name, address and CRA account number. From there, it's the financial institution's responsibility.

How is the taxpayer notified? The CRA sends a copy of the requirement-to-pay document.

Source: Canada Revenue Agency

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