If you are behind on paying taxes and the Canada Revenue Agency (CRA) starts to apply pressure, it can lead to serious trouble that can last for years.
Under federal legislation, the CRA can garnish wages, take money from your bank, divert tax refunds, withhold tax credits and place a lien on your property.
On top of that, there is daily interest on outstanding balances until you pay your tax debt in full, so it is essential to deal with the problem quickly.
If you are looking for a way to achieve CRA debt forgiveness for your tax bill, CERB repayments or other government debt, here are some programs that can help you get some of your tax debt forgiven in Canada.
Set up a payment arrangement with the CRA
The Canada Revenue Agency (CRA) will work with you to settle your outstanding taxes in regular payments over an agreed period. For instance, if you owe $2,000, you may propose a payment arrangement to make monthly payments of $250 for the next eight months.
You can call the CRA at 1-866-256-1147 to set up your payment arrangement. You must explain why you need extra time to pay and might need to disclose your monthly income and expenses.
The payment arrangement begins when you make your first payment. You must keep up with payments on the agreed dates in your arrangement and file all tax returns on time. Interest will continue to accrue on your debt during this period.
If you do not adhere to the payment terms, the CRA can impose wage or bank account garnishments, set-offs, liens, and withhold benefits or credits.
Request for Taxpayer Relief
If penalties and interest are rising on your tax bill, you can submit a Request for Taxpayer Relief.
Under taxpayer relief provisions, the CRA will waive penalties and interest if you have a legitimate reason, such as financial hardship.
If you incurred penalties or could not pay due to extraordinary circumstances–say you were hit by a car or had an accident–the CRA may also be willing to grant you relief.
There are other reasons that qualify for taxpayer relief, such as illness, emotional or mental distress, natural disaster, civil disturbance, service disruption and delays or errors caused by the CRA.
You must include any supporting documents requested and copies of any notices, letters or statements sent to you by the Canada Revenue Agency that show the penalties and interest charged to your account.
Explain why you’re asking for relief, why you couldn’t meet your tax obligations, and what you’ve done to resolve the situation.
Formal CRA debt forgiveness or settlement
When you negotiate directly with the Canada Revenue Agency, they won’t settle a tax debt for less than the amount owed. However, the CRA will accept a formal debt arrangement to resolve tax debts.
Bankruptcy and a consumer proposal are two legally binding debt solutions that offer CRA debt forgiveness for tax debts.
A consumer proposal is a formal debt forgiveness program that allows you to settle your unsecured debts, including tax debts, while only paying what you can afford, depending on your financial situation.
By filing a consumer proposal, you can reduce your debt and consolidate what’s left into a low flexible payment.
You receive immediate protection from all your creditors; collections stop, penalties and interest are frozen, and wage garnishments are lifted. You can protect your assets too. On completion of a consumer proposal, you are discharged from your debts.
Personal bankruptcy also reduces and eliminates CRA debts and offers the same creditor protection as a consumer proposal.
The last thing you want to do is ignore tax debts. Don’t wait until the CRA garnishes your wages or registers a lien on your property. The quicker you act, the better.
Both bankruptcy and a consumer proposal let you resolve your tax debt and can offer debt forgiveness, allowing you to regain control of your finances.
Only a Licensed Insolvency Trustee can negotiate a consumer proposal or bankruptcy with the CRA and immediately stop CRA collections. Talk to a trustee today to get started.
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