What happens if you owe cra money

As mentioned, not filing your taxes could be considered tax evasion, which is a crime, so you will certainly want to file even if you cannot pay. What you should do is attempt to arrange a fair and affordable payment plan that CRA will accept and that you can live with. Take a realistic look at your budget and consider what you can pay.

Expect the CRA to push you hard on what they consider fair. When contacting the CRA directly, you are opening yourself up to very well-trained collection agents who have significant power under the Income Tax Act and the Excise Tax Act. They know how to lead you into divulging more information about yourself than you are required to provide, and this leaves you in a potentially dangerous situation where they know the details of how to squeeze you. With that said, doing nothing will leave you wide open to harsh collection efforts by CRA.

Unless you can pay in full on a very short timetable, we never recommend that you contact CRA directly. It is generally better to work with an experienced professional to negotiate with CRA.

A professional will know your rights and the consequences of certain disclosures. This will go a long way to ensuring you are treated fairly and receiving the full benefit of CRA repayment policies — not simply what the collector chooses to tell you.

If you are thinking about borrowing against your home, putting your property for sale for back taxes, or obtaining other credit to repay CRA, you should do so before CRA puts a lien on your home as part of their collections action.

However, know that there is a risk to these strategies as well. Any sales or loans should be negotiated through a tax professional who specializes in this area. If you go directly to your existing bank or lender you can damage your relationship with them. Many lenders, especially banks, frown upon back taxes and view them the same as having bad credit. You may not only be declined for the increased financing, but the lender may also cancel existing loan arrangements they have with you.

If you are currently suffering from financial hardship, cannot pay your CRA back taxes and have no fair and practical solution to repay your debts, then a consumer proposal may also be an option.

A good professional advisor will be skilled at looking at all your options and explaining them to you — from objecting, appealing, seeking reductions of the amounts of interest and penalties being charged to you, borrowing to pay, obtaining repayment terms, and if none of these are right for you the right of protection under Federal Law against all creditors including CRA.

However, you cannot handle the debt until you file your tax return. The CRA will not address your debt or help you with a solution if you do not file. It can be a burden to file taxes, but the sooner you do, the quicker you can eliminate your tax debt. Once you file your taxes, you will receive a Notice of Assessment for every year you filed. Any penalties or interest will be added to your Notice of Assessment. Under this tab, select Account Balance and Statement of Account, you should see your balance owing there.

Click here to learn about the three main financial documents every business owner should understand. The CRA offers various ways to pay, as listed below. You can choose whichever option works best for you. Keep in mind that some forms of payment can take several days or weeks to process so allow for processing time. The CRA appears daunting on the outside, but they are actually quite accommodating when it comes to payment.

All they ask for is communication. In order for this to happen, you need to prove that you have unsuccessfully tried to pay back what you owe. If they are willing to make a payment arrangement, the CRA will review your financial details and create a plan that works for both parties. After creating an arrangement with the CRA, you must keep up with your end of the deal and file future tax returns on time.

For more information about payment arrangements with the CRA, click here. If you can only afford to pay part of your tax debt, you will need to make a payment arrangement with the CRA as well. You can make your first partial payment with the CRA to start the process.

The CRA will apply your payment to your oldest tax balance unless you advise them to apply it to another tax debt. Under very special circumstances, the CRA may relieve you from penalties and interest on tax debt.

Note that this program does not relieve you of all your debt, only penalties and interest. As mentioned, the relief program only applies to individuals in very special circumstances. The taxpayer must demonstrate an inability to pay due to financial difficulty and extraordinary conditions.

When dealing with a consumer who has tax debt, The CRA typically requires full payment of the total amount due. Tax debt is unsecured which means a taxpayer can file a consumer proposal to help relieve the burden of the debt. This will need to be done with the help of a Licensed Insolvency Trustee.

This is the only way to settle tax debt for less than the full amount. If you choose not to pay your tax debt, the CRA will take legal action. It should give you enough to live, but the payments can be considerable depending on your income.

If you owe money to the CRA, bankruptcy will eliminate those debts, but these are all factors to consider. Talk to an insolvency trustee about your options. When you file for bankruptcy, you enjoy CRA debt relief along with relief from all other unsecured creditors.

Since , it has been listed as an ordinary unsecured creditor on the same level as any bank, credit card company, or other lenders. CRA debt can now be discharged unopposed. Otherwise, as a general rule, if you owe Revenue Canada money, insolvency can help.

A consumer proposal is a popular alternative to bankruptcy because it provides debt relief from unsecured creditors, including debt forgiveness from CRA. When you file a consumer proposal with a licensed insolvency trustee you are not required to sell any of your assets to repay your debts or pay any surplus income.

To start the consumer proposal process, you will first need to schedule a consultation with a licensed insolvency trustee where you will review your finances. After reviewing your income, expenses, and total debts, the two of you will find a fair amount that you can pay each month to all of your creditors. These payments can last up to five years after which, you will be discharged from all debts covered by the proposal, including CRA debts.

Tax debt in Canada can be included in a consumer proposal and the CRA will often accept less than your full amount owing, though how much they will settle for will depend on the situation. In order to get the CRA to accept your proposal, you will have to file any and all outstanding tax returns. With a consumer proposal, you are making an offer of a reduced sum of money that you owe on your taxes. The CRA, in this case, would need to accept the proposal, and if accepted, once you have completed the proposal, the CRA debt will be forgiven.

If a consumer proposal is not a viable option for you, then filing for bankruptcy may be your next solution. With this, your trustee would be required to file a pre-bankruptcy tax return and a post-bankruptcy tax return. Should the pre-bankruptcy filing result in debt owing to the CRA, this would be covered in your bankruptcy. If a post-bankruptcy tax return results in debt owing, you are responsible for paying this amount.

The post-bankruptcy filing covers the time period from the first day of your bankruptcy to December 31 of the year of filing. While CRA debt forgiveness through insolvency will provide the most relief and eliminate a considerable portion of what you owe, there are reasons you may not want to pursue them. Bankruptcy and consumer proposals will also both appear on your credit report for several years after you have been discharged, which can make it harder to qualify for another loan down the line.

You also have a debt consolidation option such as a debt consolidation loan, but you should proceed with caution.