Table of Contents
Struggling to pay off your tax debts? You’re not alone. Tax debt is not as uncommon as you’d think. A 2020 survey showed that Canadian households owed, on average, $1.71 of income tax debt for every dollar of disposable income. In light of this high household debt ratio, the fact that many Canadians owe taxes to the Canada Revenue Agency (CRA) shouldn’t come as a surprise.
And getting into tax debt can be surprisingly easy. People who are self-employed often owe on their Harmonized Sales Tax (HST). Sometimes, pensioners may owe income tax because their pensions didn’t have enough income tax taken off. Individuals who used their RRSPs to pay off other debts may end up owing the CRA. Unfortunately, this list can go on and on.
The Licensed Insolvency Trustees at Remolino & Associates are financial experts who can help solve your tax debt problems. If you owe taxes, read on to find out more about owing tax money and how to pay off your tax debts to the CRA.
CRA Has The Power To Force Collections
The Canada Revenue Agency (CRA) is responsible for the administration of several tax credit and social benefit programs. It is empowered by the federal, provincial, territorial, and First Nation governments to handle Canada’s tax revenue, benefits, and other related programs.
But the governments also empower it to force the collection of unpaid taxes, and income tax debt. And the CRA can achieve that in several ways. The Agency can freeze your bank accounts, garnish your wages, seize your investments, and more.
As you can see, owing taxes to the CRA is not a trifling matter. But how can you eliminate tax debt?
CRA Tax Debt Relief Options
There are several ways to pay off your CRA tax debt:
Owe Tax Debt And Can’t Pay?
Whether you have:
- GST/HST tax debt
- Small business tax debt
- Back income tax debt
- Unpaid source deductions
- Other tax debts
We can help. Remolino & Associates can provide you with solutions to eliminate the income tax and other tax debts you owe the Canada Revenue Agency. Our Licensed Insolvency Trustees are financial experts who have vast experience in negotiating with the CRA.
Contact us today and take the first step toward a debt-free life.
Payment in full
Paying the full balance of your debt at once has some advantages. Paying in full helps you avoid the legal and financial consequences of owing money to the Canada Revenue Agency, and it also enables you to avoid interest charges.
If you want to repay your tax debt, but you lack the funds to do so, you can contact the CRA and negotiate a payment arrangement. A payment arrangement allows you to pay off your debt over a certain period of time.
After reviewing your financial information, the CRA will contact you to set up an arrangement that would allow you to repay your debt in small increments on a regular basis.
Once you manage to agree on a payment plan with the CRA, you have to pay according to the plan, ensure you file all your returns on time, and meet your tax obligations. The CRA may review your payment arrangement from time to time.
It’s important to note that arranging a repayment plan with the CRA does not reduce the value of your debt, but it makes your debt more manageable because it allows you to repay it over a longer timeframe. You will also have to pay all the penalties and interest associated with your debt.
If your financial situation changes and you no longer afford to meet your payment arrangement, you should contact the CRA. Otherwise, the CRA may take legal action against you to collect the balance of your debt.
The regular payments you make to the Canada Revenue Agency after agreeing on a payment arrangement are called partial payments. As a rule of thumb, the CRA uses your partial payments to cover your oldest tax debt unless you request otherwise.
You will continue to make partial payments until your debt is paid in full, including any interest your debt accumulates until you pay it off.
Taxpayer relief provisions
The CRA offers some taxpayer relief provisions. You may receive grant relief from penalty or interest if the following situations prevent you from meeting your tax obligations:
You’re unable to pay due to financial hardship
Various actions of the CRA affected your ability to pay
You should keep in mind that these taxpayer relief provisions do not affect the principal portion of your debt. They only grant relief from any penalties and interest your debt might have accumulated.
To qualify for these relief provisions, you have to prove the extraordinary circumstances listed above and secure the services of a tax lawyer to assist with your application.
To find out more about the circumstances that may lead to relief from penalties or interest, visit this CRA page.
If you’re struggling to repay your tax debt, you should consider debt consolidation as a solution. Debt consolidation means taking out a large loan to pay off all your smaller debts, including your CRA debt.
You should only consider this solution if you can qualify for a low-interest rate loan and take out a loan that covers all your debts. Doing so usually means having to pay lower interest rates than having multiple loans, and it allows you to pay off your debt over a longer period of time.
However, trading multiple debts for a high-interest rate loan may only lead to more financial problems down the road, so you should only use this solution if you can qualify for a loan that offers a good interest rate.
File a consumer proposal
Filing a consumer proposal with the help of a Licensed Insolvency Trustee can lead to tax debt relief. When you file a consumer proposal, you gain immediate protection from all collection efforts, including wage garnishment, account freezes, and CRA seizures. A consumer proposal also brings a halt to all penalties and interest charges, and it enables you to consolidate your debts into a single monthly payment.
A Licensed Insolvency Trustee at Remolino & Associates can help you with filing a consumer proposal. A consumer proposal can also help you deal with other unsecured debt, such as credit card debt, student loans debt if the loan is older than seven years, car loan debt, payday loan debt, etc.
File personal bankruptcy
If you’re overwhelmed by debt and tax debts are only a part of your financial problems, filing personal bankruptcy can be the only solution at your disposal.
Filing for bankruptcy requires the help of a Licensed Insolvency Trustee. Bankruptcy is a safe, regulated process that offers honest debtors the chance to have a new financial start. You may want to speak to a Licensed Insolvency Trustee to see if Bankruptcy is the best debt relief option to deal with your tax debts.
CRA Debt Forgiveness or Settlement
If your debts toward the CRA are too large and you’re unable to pay them, you might be wondering if you could benefit from CRA debt forgiveness programs or settlements. Unfortunately, this is not the case.
Even though the CRA is enforced by federal and local governments to collect taxes, it does not have the authority to forgive or settle your taxes on its own. You can negotiate a payment plan with the CRA, but you will still pay your dues in full, plus interest and penalties.
The CRA offers some taxpayer relief provisions, but the provisions will only grant relief from the interest and penalties accumulated by your debt. Even so, you can only access the relief provisions under extreme circumstances.
Remolino & Associates Can Help Resolve Your Tax Debt Problems
At Remolino & Associates, we have the experience necessary to arrange a payment plan between you and the Canada Revenue Agency. Our Licensed Insolvency Trustees can help create a plan to eliminate your tax debt with low monthly payments that you can afford.
Contact us today if you want to:
- Stop collection calls
- Stop wage garnishments
- Stop account freezes
- Gain protection from legal action
- Gain protection for your assets
- Eliminate tax debts
- Secure a fresh financial start
- And more