What is Tax Debt?
This can include any personal taxes owed to the Canada Revenue Agency (“CRA”), which can arise from several reasons such as:
Unpaid Income taxes
HST from self-employed individuals
Unpaid source deductions
Withdrawing RRSPs
Working multiple jobs and not enough taxes being withheld by your employers
CERB overpayment
CRA has the following powers to collect your tax debt:
Garnishing your wages
Registering a lien against your home
Seizing money in your bank accounts
Charging interest on your amounts owing
CRA has more powers than other unsecured creditors, so it is important to take timely action to protect yourself and your assets.
Options:
1) Pay in Full or Payment Arrangement – If you are unable to pay all your taxes in full immediately, you may contact CRA to negotiate a payment schedule to pay your balance over a period.
2) Request Reassessment - If you believe the amounts owing are not correct you can contact CRA for a reassessment or find a tax professional to assist you.
3) Taxpayer Relief Provisions – CRA may grant you relief from penalty and interest when the following types of situations prevent you from meeting your tax obligations:
Extraordinary circumstances
Actions of the CRA
Inability to pay or financial hardship
Other circumstances
4) Consumer Proposal or Bankruptcy
In a consumer proposal or bankruptcy, CRA is treated like any other unsecured creditor and will be prevented from taking any further action against you. This means all interest on your CRA debts will stop and any garnishments against your pay will also stop.
If you have other debts such as credit cards and lines of credit, then it may make most sense to file a consumer proposal or bankruptcy.
Are you struggling with paying your debts? Contact us for a free consultation to review options for reducing your debt.