Tax Debt Help: Who Do You Call?

When it comes to grappling with the Canada Revenue Agency (CRA) over tax debt issues, knowing who to turn to can be a daunting task. Some scenarios may be straightforward, allowing you to resolve them independently, while others might require more expertise. Opting for the wrong professional could end up costing you more than necessary. Here is an in-depth guide on getting the right help with tax debt.

Anecdotal Evidence: Real-Life Stories

Let’s consider two real-life stories highlighting the importance of choosing the right professional when seeking tax debt help.

Story 1: An Expensive Clerical Error

Janette, a Certified Credit Counsellor, narrates the case of a client who sought the services of a tax lawyer to resolve a simple clerical error. The client had made a minor mistake on their tax return, which the tax lawyer corrected at a cost of thousands of dollars. In this instance, the client could have easily resolved the issue independently by submitting a T1 Adjustment Request or sought help from a tax accountant for a much smaller fee.

Story 2: The Unrecorded Foreign Pension

Another client had forgotten to declare his foreign pension in his tax return. This oversight led to him owing the CRA $12,000 in income tax, and he also lost his eligibility for the guaranteed income supplement. With a fixed income, the client couldn’t afford to repay the CRA and ended up incurring more debt by hiring a tax lawyer to help resolve his tax debt, which turned out to be in vain. In this case, seeking advice from a licensed insolvency trustee about his unaffordable tax debts could have saved him a significant amount of money.

Navigating Tax Debt Scenarios

What course of action do you take in these situations? Here’s a guide on how to handle different tax debt situations:

Unfiled Tax Returns

If you haven’t filed your taxes, the solution is simple: file your taxes. The CRA takes unfiled tax returns very seriously because they can’t ascertain how much you owe. You can file your taxes independently or enlist the help of a competent tax preparer, bookkeeper, or accountant.

Accusations of Tax Fraud by CRA

If the CRA accuses you of fraud for underreporting income or fabricating deductions, you should consult a tax lawyer. Tax fraud is a severe crime that could lead to hefty fines, restitution orders, or even jail time. A lawyer is crucial in these circumstances, as they can provide confidential counsel (solicitor-client privilege) and represent you in court.

Errors Made by CRA

Occasionally, the CRA may make errors in their assessment. These can be resolved without the need for a lawyer. An accountant can review the assessment to check if the CRA has accurately assessed your tax situation. If there’s an error, the accountant can help you rectify it by filling out a T1 Adjustment slip.

Owing Money to the CRA

If you owe money to the CRA, there are three ways to deal with it:

 

Making Payment Arrangements: The CRA will usually agree to a repayment plan within 12 months, plus interest.

Filing Bankruptcy: If you owe more than you can repay, you can file for bankruptcy or a consumer proposal. These options can include your income taxes.

Filing a Consumer Proposal: In a consumer proposal, all taxes are included up to the end of the previous year. However, there are special rules concerning taxes owed in the current year.

 

Getting CRA to Accept Your Consumer Proposal

The CRA reviews consumer proposals on a case-by-case basis. They consider factors such as:

 

  • Your history of tax return filing;
  • Past cooperation with CRA;
  • Previous insolvency filings;
  • Attempts at making payments;
  • Comparison of the amount they would receive in the proposal versus bankruptcy;
  • Your ability to make the payments in the consumer proposal.

 

Convincing the CRA that you’re an honest debtor who has unfortunately fallen on tough times can increase your chances of them accepting your proposal.

Determining if You Need a Lawyer, Accountant, or Tax Preparer

Here are some steps to help you decide if you need a lawyer, accountant, or tax preparer:

 

Research: Conduct thorough research about your situation and the professionals you are considering.

Ask Questions: Make sure the advice you’re receiving is tailored to your specific situation.

Get a Second Opinion: If you’re unsure, get another professional’s perspective.

Best Interests: Ensure the advisor has your best interests at heart.

 

If you owe money to the CRA and are considering your options for dealing with tax debt, contact a Licensed Insolvency Trustee for a free consultation.

Conclusion

Tax debt can be a complex issue that requires careful navigation. Whether you need a tax lawyer, accountant, or tax preparer will depend on your specific circumstances. By understanding the role each professional plays and considering the nature of your tax issue, you can make an informed decision about who to call for tax debt help. Remember, the goal is to resolve your tax issues in the most cost-effective and efficient way possible.

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