Do you have outstanding tax debt obligations that you have to pay the Canada Revenue Agency? There are a few different methods in which you can eliminate this debt.
Are you wondering how to eliminate your tax debt with the Canada Revenue Agency? Fortunately, there are a number of solutions to deal with it. The CRA tends to act quickly and take harsh actions against you to collect the tax owing. Therefore you want to be mindful of these three factors:
- The amount that you owe
- Your ability to pay
- Your history of dealing with the CRA
>With these three factors in mind, you are in a better position to negotiate a settlement or paid plan with the CRA. The CRA may allow you to pay past due tax balances over a specific period of time such as a year for instance. However, there could be some issues that go along with the payment plan. First you would not be eligible to reduce the tax that you owe, instead you will be required to pay the full amount over the agreed term. Secondly, your unpaid debt will continue to accrue interest in addition to other penalties for the period that it remains outstanding.
Besides negotiating payment terms with the CRA, another option available to you is filing a consumer proposal with a licensed trustee under the bankruptcy and insolvency act; also known as BIA. You can then negotiate a compromise or settlement of any tax debt obligations without going bankrupt. This option is advantageous because:
- The CRA may accept a reduce amount of the debt that you owe
- Interest in additional penalties will stop on the day of the proposal
Suppose that negotiating payment terms or filing the consumer proposal under the BIA does not work for you then the only remaining option to deal with the tax debt for you would be to file for bankruptcy. With this method, all debts with income tax and GST are legally extinguished.
So here’s the tip, to get rid of your tax debt with the CRA, be mindful of how much you owe, your ability to pay and finally your history with the CRA. If you also have unreported income that you have not disclosed to the CRA and would like to know how to avoid further penalties, consider taking a look at this article on the voluntary disclosure program for Canadian taxpayers.
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.