Canadian Tax Arrears – How to Make a Deal with Revenue Canada
Question: I owe Revenue Canada approx 8K in personal income tax arrears. I submitted an income and expense form showing that I have less than 100.00 left at the end of the month and submitted an amount of 150.00 per month as a voluntary payment option. My proposal was refused and Rev Can countered with 425.00. I cannot make that payment. Is there any recourse other than Consumer Proposal?
Answer: It is not easy to make a deal with Revenue Canada (now called CRA). You have a few options:
First, you could talk to them again and attempt to negotiate a lower payment. You probably won’t be successful, since CRA wants all debts paid off within a year, or 18 months (which is why they want you to pay $425 per month; your debt will be paid in about 18 months).
Second, you could simply start sending them $150 per month and see what they do. They may simply accept your payment and take no further action. Of course you will continue to incur interest on the debt, and you run the risk that they may decide to freeze your bank account or garnishee your wages to collect.
Third, as you suggest you could file a consumer proposal. If CRA is your only creditor, they are not likely to accept it, however it may be worth a try.
Finally, you could declare personal bankruptcy, which does eliminate your tax debt, but obviously has other repercussions. You should consult with a bankruptcy trustee to understand all of your options before deciding on the best option for you.