Tax Debt Settlement: What CRA Wants

Making a Debt Settlement With Canada Revenue Agency (CRA)

When you’re dealing with outstanding tax debts, understanding the perspective of the Canada Revenue Agency (CRA) can be vital. In this article, we delve into the strategies, powers, and expectations of the CRA in a tax debt settlement situation.

The Power of CRA Collections

One of the biggest challenges when dealing with tax debt is the unique collection powers that the CRA possesses. Unlike other creditors, the CRA can take swift and decisive action to recover outstanding debts.

Garnishment and Freezing of Assets

The most common method employed by the CRA is to garnish your wages or freeze your bank account. The Canadian Income Tax Act gives the CRA the authority to do this without obtaining a court order, which can expedite the process significantly.

Liens Against Property

The CRA can also register a lien against your property without your consent. This essentially means that they have a claim on your property until your debts are paid, similar to a second mortgage.

Navigating through CRA Debt Settlement Options

When dealing with tax debt, there are several options available to you. Understanding these can help you make informed decisions.

Negotiating Payments Independently

The initial step in dealing with any debt is to negotiate repayment terms. The CRA is open to negotiations and will typically ask for an outline of your monthly living expenses to determine a reasonable repayment plan. However, be prepared to pay back all tax debts, and the CRA might not waive penalties and interests depending on your financial situation and the reasons for your tax debts.

Filing a Consumer Proposal

If independent negotiations are unsuccessful or impossible due to your financial situation, you might consider filing a consumer proposal. This method allows you to negotiate an agreement with the CRA to pay less than the full amount owed. It’s crucial to note that only a Licensed Insolvency Trustee can help with back tax settlement.

Filing for Personal Bankruptcy

Personal bankruptcy can be considered as a last resort when all other options have been exhausted. However, it comes with its own set of conditions, especially when dealing with the CRA. For instance, if your tax debts are $200,000 or more and represent 75% or more of the total debts, a court hearing will be required to establish the terms of discharge from bankruptcy.

Understanding CRA’s Expectations

When negotiating a tax debt settlement with the CRA, it’s essential to understand their expectations. Several factors will be taken into account, including your budget, past payment efforts, timeliness of filed returns, and the risk of future tax debts. The CRA assesses each proposal on a case-by-case basis, making it difficult to predict the settlement percentage.


Dealing with tax debt can be a daunting task. The CRA’s unique collection powers and expectations can complicate the process. However, understanding their perspective and exploring the available options can help you navigate this challenging situation.

Remember, if the burden becomes too heavy, seeking professional advice from a Licensed Insolvency Trustee can be beneficial. They can provide insight into what the CRA might be willing to accept and guide you through the legal processes involved in tax debt settlement.

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