Looking for a solution for outstanding tax debts, people are often asking: Is tax debt relief a possibility? Can I make a deal with Canada Revenue Agency (CRA), formerly known as Revenue Canada, for the taxes I owe?
The answer is yes. It is possible to make a deal with Canada Revenue Agency. Here is how.
Negotiate payment terms with Canada Revenue Agency
If you owe HST, income tax or other tax debts to CRA and cannot pay the balance all at once, your tax debt solution might be negotiating payment terms with Canada Revenue Agency. Contact your nearest Canada Revenue Agency office. Explain your circumstances, and negotiate a payment plan. For example, if you owe $1,000, you may offer to pay $100 per month for the next ten months. It will be up to CRA to decide if they will accept your offer, or take further action against you to collect the taxes owing.
However, there are three points you should remember:
- You will be required to pay the full amount of your outstanding tax debt;
- You will continue to be charged penalties and interest until your debt is paid in full;
- If you cannot reach an agreement with CRA, they have the power to with-hold child tax credits and HST/GST credits until your debt is paid. They also have the power to garnish your wages and take funds from your bank account, so treat this debt seriously.
Make a deal to settle for less than the amount owing with a consumer proposal.
As a general rule, CRA will not agree with individual taxpayers to settle tax debts for less than the full amount owing. Their logic is simple. If they allow you to pay less than your entire tax liability, they may be forced to make the same deal with everyone else.
If you have outstanding taxes, it is possible to settle you tax debts for less than the full amount owing by filing a consumer proposal with a licensed trustee in bankruptcy. A consumer proposal is a great option for dealing with tax arrears because:
- you may be able to pay less than the full tax debt owing;
- all interest and penalties stop when you file;
- it stops all garnishments and other legal actions by CRA;
- your other unsecured debts are included in your proposal.