How to Ensure the Canada Revenue Agency Approves Your Consumer Proposal

Consumer proposals can be an effective way to manage debt, but getting them approved by the Canada Revenue Agency (CRA) can be tricky. This article will guide you through the process and help you understand the specific criteria that the CRA looks for when assessing consumer proposals.

A Brief Overview of Consumer Proposals

A consumer proposal is a legally binding process governed by the Bankruptcy and Insolvency Act, which allows you to negotiate with your creditors to pay back a portion of your debts over time. It’s an alternative to filing for bankruptcy and can be a viable option for many individuals struggling with their financial obligations.

Why is the CRA a Unique Creditor?

Unlike banks and credit card companies that have the choice to grant you credit, the CRA becomes a creditor when you fail to pay your taxes. They have specific requirements for accepting consumer proposals, and meeting these conditions is crucial for proposal approval.

Key Requirements for the CRA to Accept Your Consumer Proposal

The CRA has a set of stringent requirements for consumer proposals:

 

  • The proposal should offer more than what the CRA would receive in case of a bankruptcy.
  • The proposed return shouldn’t be minimal; a mere cent on the dollar, even if it’s more than a bankruptcy settlement, won’t suffice.
  • You should be able to prove that you can make the proposed payments.
  • All your tax returns should be current.
  • Your previous dealings with the CRA should reflect an honorable citizen’s approach.
  • You should commit to filing all future tax returns on time.

 

These conditions should be taken seriously, as failing to meet any one of these could lead to the rejection of your consumer proposal.

The Importance of Filing All Back-Tax Returns

One of the crucial conditions for CRA acceptance is having all back-tax returns filed. The CRA cannot assess the reasonableness of your proposal if they are unaware of how much you owe in back taxes.

Staying Up-To-Date with Future Tax Returns

It’s essential to demonstrate your commitment to staying up-to-date with your tax returns in your proposal. This shows the CRA that you are serious about fulfilling your tax obligations and can help build trust.

Standard Clause: The Debtor confirms that all tax returns will be filed as due, and that all required tax installments will be made when due. If tax returns and installments are not prepared and paid when due, such breach will be considered a default in the terms of this proposal.

This clause essentially means that any delays in filing your tax returns or non-payment of required installments will be considered a breach of proposal terms, and the CRA can terminate the proposal.

Paying Your Taxes Regularly

If you’re a quarterly remitter, it may be beneficial to make monthly installments instead. Regular payments can reassure the CRA and improve your financial situation. If you’ve had problems with tax filing in the past, getting professional help can also be advantageous.

Conclusion

A consumer proposal can be a way out of a difficult financial situation, but getting it approved by the CRA can be challenging. By understanding the CRA’s specific requirements and ensuring that you meet them, you can increase the chances of your consumer proposal being accepted.

If you’re struggling with debts, including tax debts, a consumer proposal may be a suitable solution. You can arrange a no-charge initial consultation with a licensed consumer proposal administrator to explore this option further.

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