How to Deal with Tax Debts

	Tax Debts - Money Problems Radio Show (Opens in a new window. Optimized for Windows Media Player 6.4 and later versions.)
Originally aired on March 18, 2006.

Show Topic:

In Canada there is no escaping a simple fact: if you earn income, you have to pay taxes. For most people that's not a problem, because your taxes come right off your paycheque each payday. Unfortunately though, there are cases where you end up owing tax money to Canada Revenue Agency (formerly called Revenue Canada), and obviously tax debts can be a serious money problem.

On today's show we discuss taxes: how they can cause money problems, and what you can do about it.

Guests:

Douglas Hoyes and Scott Schaefer work for Hoyes, Michalos & Associates Inc, one of Ontario's leading personal insolvency firms. They emphasize a fresh start when dealing with money problems, and file dozens of consumer proposals and personal bankruptcies every month. They can be reached at www.hoyes.com or, in Ontario, at 310-PLAN (no area code required).

Show Summary:

Doug Hoyes explained that tax debts are often caused by being self-employed and not remitting taxes each month. Other common causes of tax problems include cashing in RRSPs to pay debts, but not having enough taxes withheld, or having more than one source of income, which when combined leads to insufficient tax withholdings.

Scott Shaefer explained that your best option when dealing with tax debts, if you have the cash, is to pay it as soon as possible. Another option is to sell assets or borrow money to repay your taxes.

A consumer proposal may be an option if your tax debts are not significant. The final alternative is personal bankruptcy.

We suggest you contact a licensed trustee today to review your options for dealing with your tax debts.

Question of the Week:

Q. I work in the residential construction industry. I was an employee, but then I thought I could make more money being self-employed, so I became a self-employed sub contractor. My first year I didn't have enough money to pay an accountant to do my taxes; when I finally got them done I owed more than I could pay. I didn't have the money, so I haven't filed my taxes for the last two years. Now Revenue Canada is calling. I'm afraid I owe a lot of money. What should I do?

A. To start, you need a plan. You will want to get your taxes filed, because until your taxes are filed there is no way to make any type of arrangement with Canada Revenue Agency. If possible, try to work out a repayment plan with CRA. They will also want you to remit installments on a regular basis to keep your current year's taxes current. If you cannot work out payment arrangements, a personal bankruptcy may be the best option. However, if you have good income, a consumer proposal may be the right choice.

Don't let your Money Problems overwhelm you; contact a bankruptcy expert today for more information about your options when dealing with tax debts.