Tax Debt Settlement Solutions - Bankruptcy Canada
Anyone can seek assistance with tax debt settlement.
Individuals in debt to Canada Revenue Agency owe different types of tax debt such as source deductions, self-employed people who owe HST, and personal income tax.
Sometimes pensioners owe money because insufficient tax was deducted resulting in a large tax debt.
In some cases, people have chosen an early cash-out of their Registered Retirement Savings Plans.
This can result in a large amount of tax debt as well.
If you owe a huge amount of back taxes and are unable to pay it back in full, rest assured, there are solutions at hand.
It is possible to negotiate a deal with the CRA and obtain debt forgiveness for the taxes you owe.
The amount of reduction on your tax debt settlement will depend on the program you select.
There are tax forgiveness programs you can consider in Canada.
Negotiate Extended Payment Terms
You will work in conjunction with the CRA to resolve your tax debt settlement.
This typically involves a payment arrangement that requires you to pay back your taxes in instalments over a period of time.
For example, if your tax debt is $2,000, you may decide to pay the CRA $200 every month for the following ten months.
To negotiate your payment terms, get in touch with your closest Canada Revenue Agency office.
The following may be asked of you:
– Explain your current financial situation and why you need an extension on your tax debt payment.
– You will be requested to file pending tax returns.
– Show expense and income projections and provide reasons why you’re unable to obtain a loan to pay off your tax debt settlement.
Canada Revenue Agency will determine if they agree with your offer or proceed with further action to gather the taxes owed.
There are a few points you need to keep in mind about extended payment terms:
– Irrespective of the deal you make with CRA, you will be accrue interest and penalties on that debt until it is paid off entirely.
– If you’re unable to reach an agreement, the CRA has the ability to withhold GST credits and child tax credits until your debt is returned.
The CRA may also obtain funds directly from your account or garnish your wages.
It’s very important to treat tax debt very seriously.
Request for taxpayer relief of interest and penalties
In a few situations, you may be granted relief from interest and penalty charges.
You may learn about the terms and conditions governing this tax relief program on the CRA website.
To be eligible for this tax forgiveness program, you must be able to demonstrate extraordinary circumstances including an inability to pay because of financial difficulty.
For instance, you were unable to pay or filed late because of a natural disaster, serious mental or emotional stress, and or personal illness.
You may also show that the extra costs arose because of processing delays and errors made the CRA.
Bear in mind, there is a ten year limitation to apply for this particular tax relief program.
You must also be able to provide all the information and forms as requested.
Do keep in mind that this program will only forgive the interest and penalty charges on your tax debt.
File a consumer proposal for tax debt settlement of forgiveness
Individual taxpayers are expected to pay the entire amount owing.
The rationale is simple.
If you’re allowed to pay less than the entire amount, then the CRA will be forced to strike the same deal with everyone.
This makes it possible to discharge your debt for less compared to the full amount with both interest and principle.
The reduction agreed to by the CRA will depend on your income, your assets, and individual circumstances.
A Licensed Insolvency Trustee can negotiate the following on your behalf:
– elimination of the interest and penalties
– handling your frozen bank account or wage garnishment
– protecting your assets
When it comes to resolving your tax debt settlement, there are tax forgiveness options available to you.
A Licensed Insolvency Trustee can obtain a stay of proceedings under the Bankruptcy & Insolvency Act, by filing a consumer proposal or bankruptcy.
This stay prevents the CRA from pursuing collection actions.
If a consumer proposal is sought, the LIT can negotiate a suitable payment arrangement on your behalf with the CRA.