Income Tax Debt is More Common Than You Think
If you live in Canada and have not filed your taxes and owe money to the Canada Revenue Agency (CRA) you’re not alone. Income tax debt is more common than you would think and unpaid taxes often account for debt problems for many Canadians. By failing to pay your income tax, the CRA can do things like withhold your HST cheques, withhold child tax credits, freeze your bank account and even garnish your wages. The CRA can also charge you penalties and interest on the money that is owed to them.
How can you pay off your income tax debt? If you are experiencing income tax debt, you have some options to help you consolidate and pay off your debt. It is possible to negotiate payment terms with the CRA or even to file a proposal under the Bankruptcy & Insolvency Act (BIA) so you can avoid filing for bankruptcy.
Negotiating Payment Terms
If you cannot afford to pay the balance you owe to the CRA, you have the opportunity to explain your financial situation to them. This allows you to negotiate a payment plan that helps you pay off your income tax debt. The CRA operates with specific guidelines so be sure to keep in mind that even if you do make a debt repayment plan with them, you will continue to be charged penalties and interest until your debt is fully paid off.
Filing a Proposal with the CRA
It is also possible to file a proposal with the CRA, which is similar to filing a consumer proposal. Filing for a proposal with the CRA will stop collection, interest and penalties that have been imposed upon you. A proposal is typically for less than 100% of the income tax debt you owe, but the CRA has specific criteria regarding proposals:
- Remitting and filling
- Remit current year installment payment of individual
- Remit current HST payment and file GST returns
- Remit current-year payroll deductions (EI premiums, CPP contributions and Income Tax)
- Exercising set-off
We Can Help
Bankruptcy & Income Tax Debt
What many people are unaware of is that when you file for bankruptcy, your personal income tax debts will also be covered up to the date of filing your bankruptcy. However, filing for bankruptcy should only be considered in the most dire circumstances and isn’t something to be taken lightly.
If you have more questions about income tax debt in Canada and solutions for how you can pay off your debt, please contact Dana MacRae Licensed Insolvency Trustee today. We are experienced in debt repayment, debt consolidation and filing for bankruptcy. We can help find a debt repayment solution that works for you.