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What can you do if you’re unable to pay the taxes you owe to the Canada Revenue Agency? Understanding your options when you can’t pay CRA taxes is crucial because the agency actively pursues unpaid debts. Knowing where to find CRA debt relief will help you stay focused on available solutions so you can regain financial stability.
CRA Tax Debt
There are several types of tax debt you can owe the government. They include personal income tax, corporate tax, GST/HST, and payroll tax. Personal income tax applies to everyone, while corporate, GST/HST and payroll taxes apply to businesses or the self-employed.
Some reasons you could have CRA tax debt are:
● You made a mistake on your tax return
● The CRA made a mistake on your tax return.
● You haven’t filed tax returns for several years.
● Your employer didn’t deduct enough income tax.
● If you have a business, you haven’t paid the taxes you owe regularly.
● If you own a business, you didn’t set aside money for taxes or used it for other purposes.
When your tax debt is the result of your error, you can change your tax return to include any deductions you missed and lower the amount you owe.
If you believe the CRA made a mistake, you can contact them. If you disagree with their decision, you have 90 days after you get your Notice of Assessment or Reassessment to file a formal objection.
After they review your complaint, which often takes time, they may or may not reduce or eliminate what you owe. If you still owe money to the CRA that you can’t pay, there are other options available for CRA debt relief.
Financial Hardship
The CRA can’t reduce the total tax owed. It can sometimes reduce or waive interest and penalties if you’re facing serious financial problems. You may qualify for this in the following situations:
● A serious illness or accident.
● The death of a loved one.
● A natural disaster that affects your ability to pay, like flooding or wildfires.
● Service disruptions from civil disobedience or other issues.
There is a process you must follow to reduce or waive the penalties and interest on your CRA debt. You’ll need to follow the CRA’s guidelines to apply for relief.
What can the CRA do if you don’t pay your taxes?
The Canada Revenue Agency has a lot of power to collect unpaid taxes. The CRA will charge penalties for late filings and interest if you pay your taxes in installments. If you don’t pay your taxes, the Agency can:
● Garnish your wages.
● Garnish your accounts.
● Apply your tax refunds and any government benefits you collect to the taxes you owe.
● Put a lien on your home.
● Seize your assets.
These are serious actions that can put your finances at risk. Fortunately, tax debt help is available if you can’t repay what you owe.
Tax debt relief in Canada
Tax debt adds up. You must pay off your tax debt in Canada or seek help through a debt program. The CRA will work with you to set up an installment plan if you can manage the payments. You’ll have to pay interest, but you’ll eventually pay off what you owe.
You may be in a situation where you can’t repay your debts because you don’t have the money. Three options to consider are:
1. A debt consolidation loan.
2. File a Consumer Proposal.
3. File for Bankruptcy.
Debt consolidation
Can you consolidate CRA debt? The answer is yes, but only if you qualify for a consolidation loan. A debt consolidation loan can be a CRA debt relief option IF you have good credit, a stable source of income and enough money to manage all your payments. The proceeds of the loan can pay off your CRA tax debt. You’ll make payments to repay the loan.
Consumer Proposal
When you file a Consumer Proposal, tax debt and most other types of debt can be included. It’s a legally binding debt relief solution. It can reduce your unsecured debts, including tax debt, by up to 80%. A Licensed Insolvency Trustee must file a Consumer proposal on your behalf.
Your creditors may vote to accept it. If they approve, you’ll make monthly payments to your LIT for up to five years to pay off the Consumer Proposal. Once you complete the terms of your proposal, you’ll receive a Certificate of Full Performance. You’re no longer obliged to make payments, and your debts will be gone.
A Consumer Proposal allows you to keep your assets, settle your debts, and stop all interest and penalties. It also prevents your creditors from contacting you, garnishing your wages or assets, and pursuing legal action.
Bankruptcy
Filing for Bankruptcy is a debt relief solution for borrowers in extreme financial difficulty. Bankruptcy can cover most types of unsecured debt, including CRA tax debt.
You’ll need a Licensed Insolvency Trustee to file for Bankruptcy on your behalf. It is similar to a Consumer Proposal because it’s also legally binding and will stop:
● All contact from creditors.
● Wage garnishments.
● Legal actions.
● Frozen bank accounts.
When you file for Bankruptcy, you could lose some of your assets, and it will affect your credit rating more severely than a Consumer Proposal.
However, after you fulfill the terms of your Bankruptcy, you’ll be given a Certificate of Discharge. Your debts, including CRA debt, will be written off, allowing you to start fresh.
How to Get CRA Debt Relief
If you need CRA debt relief, help is available. Our Licensed Insolvency Trustees are here to guide you through your options so you don’t have to face this alone.
A permanent solution is the best way to resolve your outstanding balance with the CRA. Interest and penalties can add up faster than you can repay your debt. If you need debt relief in Canada, including CRA debt, a Consumer Proposal or filing for Bankruptcy, both offer you a way to move forward and put your debt behind you.
Our Licensed Insolvency Trustees at Allan Marshall and Associates have been helping Canadians get a fresh start for over 40 years. If you’re tired of managing your debts on your own, contact our office online or by phone at 1-888-371-8900 for a free consultation today.
