What Is CRA Looking For In A Consumer Proposal?

CRA & Consumer Proposals: What Does the Canada Revenue Agency Want?

The Canada Revenue Agency (CRA) can be your creditor just like any other institution, and as such, it’s open to considering a consumer proposal. In essence, the CRA evaluates a consumer proposal based on its fairness and reasonability for all parties involved.

In this article, we will delve into what exactly the CRA looks for in a consumer proposal.

Understanding Consumer Proposals

A consumer proposal is an exclusive government-structured program in Canada that allows consumers to introduce a legally binding debt settlement offer. This includes tax debts owed to the CRA.

While the CRA typically does not negotiate on tax debts, they respect the country’s laws and understand that they are subject to the rules and procedures spelled out in consumer proposal legislation.

What Does CRA Look For In A Consumer Proposal?

The CRA bases its acceptance of a consumer proposal on various factors. Here are some key considerations:

1. Filing of Outstanding Tax Returns

The CRA will review your file to verify that all outstanding tax returns have been filed. This step is crucial for the CRA to determine how much you owe them.

2. Cause of Tax Debt

The CRA will investigate the cause of your tax debt. Did you cash in your RRSPs, or did you run a business? They will want to ensure that you have taken measures to prevent incurring tax debt in the future.

3. Future Viability of Your Business

If you ran a business, the CRA will want to gauge its future viability. Did your business fold, or is it still ongoing? They will look for potential new business opportunities or changes made to your accounting systems to prevent future tax debts.

4. Efforts to Repay Previous Debts

The CRA will consider your past efforts to repay debts. Have you been honest and cooperative with the CRA in the past, and tried to arrange payment plans?

5. Consumer Proposal Motivation

Is the consumer proposal driven by tax issues? Do you have other debts, or have you repaid other debts while neglecting to pay your taxes?

6. Future Financial Prospects

The CRA will assess your future financial prospects. If they agree to the proposal, they want to be confident that you’ll be able to fulfill its terms without incurring new tax debts.

7. Filing Future Taxes on Time

In some cases, the CRA may request that you agree to file future taxes on time and pay any balance owing promptly.

8. Clause for Sudden Windfall

The CRA may ask you to agree to add any sudden windfall received during the proposal to your proposal payments.

While this list is not exhaustive, it provides a comprehensive understanding of what the CRA might look for if you’re presenting a consumer proposal that includes tax debts.

For further information on the consumer proposal process, you can contact a local Ontario trustee to create a plan to eliminate those debts.

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