Settle Tax Debts Without Battling the Canada Revenue Agency
Every year many thousands of people living in Canada find themselves unable to pay the CRA (Canadian Revenue Authority) taxes they owe.
In response, they often approach lawyers promising to fight the taxman on their behalf, but this might not be the best solution.
Taking an adversarial approach doesn’t always get the results that you want, and it could even harm your cause.
The CRA isn’t the enemy when it comes to tax debts.
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Fundamentally, they just want to ensure that they treat all taxpayers equally, ensuring that everyone pays the amount that the law requires.
While fighting them using traditional legal approaches might seem like the only way forward, there are alternative legal mechanisms that you can use if you find yourself in an unsustainable tax debt hole.
You don’t automatically have to go to court.
Canadian law gives you legal mechanisms to settle tax debts without a prolonged and vicious legal fight.
How To Settle Tax Debts With The CRA
When the CRA discovers that you owe it money, it assigns a tax collector to extract it from you.
These agents will contact you to discuss your situation and assess your willingness and ability to repay.
The CRA has significant legal powers to force you to pay that go above and beyond regular creditors.
These include freezing your bank accounts, garnishing money from your pay, and placing liens on your property without warning.
It is imperative, therefore, that you find mechanisms to settle tax debts as rapidly as you can to avoid loss of assets and financial hardship.
Remember, the tax authorities have the full force of the state behind them.
Your best defence, therefore, is to use established legal tools.
The foremost of these is a consumer proposal.
This legal facility helps to deal with your tax debts and prevents the CRA from taking any of the intrusive actions we discussed above.
At root, a consumer proposal offers you two things you need when you are in too much debt:
- A way to reduce the total amount that you owe your creditors;
- A way to deny the CRA the legal right to garnish your wages, freeze your bank accounts, and register a lien on your property.
Thus, a consumer proposal allows you to repay the CRA more than they would receive if you went bankrupt.
At the same time, it lets you reduce your overall debts to a more manageable level.
Why Consumer Proposals Are The Best Solution
Many people in tax debt owe both the CRA and other creditors money they can’t realistically payback.
A consumer proposal, therefore, is a tool that you can use to reduce your obligations, both to the tax authorities, and anyone else.
The term “consumer proposal” comes from the fact that it takes the form of negotiation.
In essence, when you engage in this process, your aim is to arrive at a deal with your creditors.
Both you, the CRA, and others you owe money work together to come up with a scheme that delivers results for all of you.
So, for instance, under traditional bankruptcy rules, the CRA cannot pursue you for any unpaid tax you incurred before the date of bankruptcy.
Because they receive no money at all from any tax you owe in this period, they are often keen to negotiate so that they can still get something.
Similarly, when you declare bankruptcy, you incur additional costs.
You may have to pay creditors from your surplus income for several months, and you will find it challenging to get credit for at least six or seven years.
Consumer proposals, therefore, help both parties.
The CRA gets a proportion of the tax debt you owe them (which they wouldn’t if you went bankrupt).
And you get to preserve your credit score and avoid the long-term ramifications of bankruptcy.
Whether you decide to go down the consumer proposal route depends heavily on your situation.
Sometimes the CRA pursues you for tax debts that you do not owe.
In these cases, you may wish to hire a lawyer.
In most cases, though, the debts are a consequence of fair accounting, and so consumer proposals are the best option.
If you have outstanding tax debts, then don’t wait: get the help you need now.
With a consumer proposal, you can avoid battling the CRA and settle your tax debts amicably.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
How to Amend a Consumer Proposal
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
Consumer Proposal Eligibility
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Canadian Bankruptcies
How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?
