I Owe Lots Of Money To Canada Revenue Agency Collections
Owing “a lot” of money to the Canada Revenue Agency Collections office depends on your situation.
For instance, a tax debt of $20,000 is insurmountable for a person who earns $40,000 a year and who also supports a family.
This person may need to hire a Licensed Insolvency Trustee or LIT.
An individual who earns $80,000 can more easily manage a $15,000 tax debt with proper budgeting.
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Hiring a Licensed Insolvency Trustee
If you owe a substantial debt to Canada Revenue Agency Collections, then it is reasonable to get in touch with a Licensed Insolvency Trustee.
Most people with a large, outstanding CRA debt find that seeking an early consultation with the LIT will help find a wider range of debt solutions.
Speaking to a LIT professional becomes even more necessary if your income tax debts have moved further along.
For instance, if the CRA has brought charges or writs against your property.
Sometimes the CRA may commence payroll garnishing.
In addition, people who are struggling with their income tax debts for several months or years will be emotionally drained.
They may not have the energy or care to seek non-bankruptcy debt solutions from a LIT.
Use the following two steps to evaluate whether you should contact a LIT for your income debt solutions.
Step One: Determine How Much Income Tax Debt You Owe
First, verify how much debt you owe.
A favorable debt solution is one that is customized to your particular situation.
Debt solutions should never be based on incomplete or inaccurate information.
- Ensure you’ve submitted all your income tax returns. The Notice of Assessments must show all the payments you’ve made. In case you have a history of unfiled personal returns, Canada Revenue Agency Collections will arbitrarily evaluate your income responsibility based on previous income history. An “arbitrary” evaluation is an estimate determined by the CRA of the amount you owe. If it’s not appealed or disputed within a required time period, then the CRA can start collection action based on these assessments.
- Take a look at all your previous tax returns to make sure your deductions were claimed. This will help to reduce what you’re owing. It is advisable to seek assistance from an accountant if your tax matter is complex.
- If your inability to pay taxes occurred because of a major event beyond your power, you may want to apply for “Taxpayer Relief Provisions” as stated under the Income Tax Act in the Income Tax Information Circular IC07-1. This provision is meant for a taxpayer’s relief from penalties and interest culminating within ten years of when the application was filed.
To be eligible for this relief, your reason for not paying should be due to extreme circumstances like serious illness, natural disasters, mental or grave emotional distress, or Canada Revenue Agency actions.
Please note, there will be no relief for the principal amount of your income tax debt.
The relief is applicable for interests and penalties only.
The application to obtain taxpayer relief is very complex.
It requires a detailed review and maybe best conducted with a tax professional.
Step Two: Know the consequences of late-filed returns and unpaid income taxes
Death and taxes are two guaranteed certainties in life.
While the former cannot be predicted, there are penalties which Canada Revenue Agency Collections can enforce if you fail to file your tax returns.
- Interest and penalties are accrued on outstanding balances on returns that are filed past the due date. Speak to your income tax professional about those due dates.
- If you fail to file your income tax return, Canada Revenue Agency Collections will make an arbitrary evaluation of your tax liability.
- CRA can withhold benefits such as Canada Pension Plan, child tax credits, GST credits, Old Age Security benefits, and even your tax refunds until the outstanding debt is paid.
- The CRA is also capable of garnishing your paycheque directly from your employer and even your bank account. They don’t need to submit a court application. Your employer and bank will be served with the “Requirement to Pay” notice.
The CRA will only accept a complete payment of your debt unless you hire a Licensed Insolvency Trustee.
Another exception is if your application for Taxpayer Relief is accepted.
If you’re burdened with a huge amount of tax debt, then know that you have tax debt solutions at your disposal.
Get in touch with a Licensed Insolvency Trustee to choose the most ideal solution for your CRA debt.
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