There are many people across Canada that need assistance with tax debt. Believe it or not, many Canadians owe some amount of debt to the Canada Revenue Agency (CRA). This includes employed staff, self-employed individuals owing personal income tax, source deductions, or even pensioners with large tax debts.
The CRA will find you
The Canada Revenue Agency (CRA) has different methods of collecting unpaid taxes – freezing bank accounts, including wage garnishments and seizing investments. Any tax debt solution you choose must take into consider the risk that the CRA will pursue these collection options.
Options When Dealing With Tax Debts
1. Arrange a repayment plan with CRA
If you are willing to repay 100% of your tax debt a repayment deal can be negotiated with the Canada Revenue Agency. Every monthly you will pay back an amount until your tax obligation is repaid in full, with additional penalties and interest. You could also take out a loan to pay off your tax debt, however debt consolidation loans come with risks including high-interested rates.
2. CRA Fairness Application
This government program will grant you relief of any interest and penalties, but you will still owe the full amount of your tax debt. You must prove extreme financial hardship and circumstances that supports your inability to repay your full tax obligation. You may also need to engage the services of a tax lawyer to assist you with your CRA Fairness application.
3. File a consumer proposal
An offer is made to the Canada Revenue Agency, in which you, along with your creditors, agree to repay a certain amount that is less than what you owe, including other unsecured debt such as credit card debt. It will need to be filed with a Licensed Insolvency Trustee to be considered.
4. File personal bankruptcy.
It is common for some people to be unable to pay back their tax debt even with all their other financial streams combined. In this situation, the only option is filing for personal bankruptcy.