Tax Debt Relief in Canada

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Are you struggling to pay your taxes? You’re not alone. Thousands of Canadians are behind on their tax payments, and the Canada Revenue Agency is cracking down. The good news is that there are options for tax relief in Canada. By working with a professional tax debt consultant, you can develop a plan to pay off your debts and get back on track financially.

There are several reasons why people in Canada may end up with tax debt. Some of the most common causes include:

–          Income tax debt due to not filing a tax return or not reporting all of your income

–          Claiming ineligible expenses or deductions

–          Underreporting income or over-claiming deductions

–          Failing to pay taxes when they’re owed

–          Receiving an incorrect assessment from the CRA

–          Paying taxes late or not paying enough taxes throughout the year

Tax debt is common in Canada, and the government has put several measures to help taxpayers manage their debt. One such measure is tax debt relief. This program provides taxpayers with a variety of options for managing their tax debt, including payment plans, reductions in interest rates, and waivers of penalties and fees.

CRA Has Strong Powers of Collection

There are four main methods the CRA can use to collect unpaid taxes: administrative action, legal action, seizure of assets, and garnishment of wages.  Each method has its own set of procedures and rules, so it is important to understand your rights and obligations. Take note that these are not CRA tax forgiveness, so you still have payment responsibilities.  

Administrative action includes sending a notice of assessment or imposing requirements to pay the tax debt in instalments. If you do not comply with the CRA’s administrative actions, they may take legal action.

A legal action involves taking the taxpayer to court. If the CRA obtains a judgment against the taxpayer, they can then take steps to collect on that judgment, including seizing assets or garnishing wages.

Seizure of assets is when the CRA takes physical possession of your assets to sell them and use the proceeds to pay off your tax debt. Wage garnishment is when the CRA takes money from your pay cheque to pay off your tax debt.

Garnishment of wages means that the CRA would contact the taxpayer’s employer and instruct them to withhold a set amount of money from each paycheck and send it to the CRA.

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Options When Dealing With Tax Debts

There are four main types of tax debt relief: payment plans, reduction in interest rates, waiver of penalties and fees, consumer proposal, and write-offs. Each option has its own set of pros and cons, so it is important to understand which one is right for you.

  • Generate a repayment plan with CRA.

If you are unable to pay your total tax bill at once, the CRA may be able to work out a payment plan with you. This will allow you to spread your payments over a more extended period. However, interest and penalties will continue to build up on the outstanding debt.

You could also consider a debt consolidation loan for your tax debts. This may be a good option if you have several high-interest debts. A consolidation loan will allow you to pay off all of your debts with one loan and have a lower interest rate than your other debts. However, you should be careful not to take on more debt than you can afford.

  • Create a CRA Fairness Application

A CRA Fairness Application is a formal request to the CRA for them to reduce or waive penalties and interest charges that have been assessed. You can make a Fairness Application if you think that you cannot pay your debt because of extenuating circumstances, such as illness, job loss, or natural disaster.

  • File a consumer proposal. 

If you cannot pay your debts, you can file a consumer proposal with a licensed insolvency trustee. This is a legal process that will allow you to negotiate a repayment plan with your creditors. If your proposal is accepted, you will only have to pay back a portion of your debt.

The advantages of consumer proposals include stopping wage garnishments, freezing interest charges, and stopping collection actions of the CRA.

  • Declare personal bankruptcy

Personal bankruptcy is a legal process that will allow you to discharge your debts. This means that you will no longer be responsible for paying back your tax debts. However, bankruptcy will have a major impact on your credit score, and will stay on your credit report for six years.

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Why Get Tax Debt Assistance from a Licensed Insolvency Trustee?

There are several reasons why you should seek help from a Licensed Insolvency Trustee when dealing with tax debts.

Licensed Insolvency Trustees are experts in debt relief, and they can help you find the best solution for your situation. We will negotiate with the CRA on your behalf and can help you to avoid wage garnishment and seizure of assets.

Trustees also have experience dealing with personal bankruptcy and consumer proposals, and we can help you understand the process and make the best decision for your situation.

When you work with a Licensed Insolvency Trustee, we at Risman Zysman will also provide personal counseling and support throughout the debt relief process. This can be a valuable resource when dealing with the stress of financial difficulties.

Tax Debt Relief Is Much Like Any Other Debt Relief

While tax debt relief may seem like a complicated process, it is very similar to other types of debt relief. The main difference is that the CRA has the legal right to collect your unpaid taxes, so you need to be careful when dealing with them.

If you are struggling to pay your taxes, the best thing you can do is to get professional help. A Licensed Insolvency Trustee can provide you with guidance and support and help you find the best solution for your situation.

At Risman Zysman Inc., our team of Licensed Insolvency Trustees has years of experience dealing with tax debts in Canada. We will review your situation and guide you on the best way to move forward. Contact us today to book a free consultation.

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