So you’ve received your assessment back from the Canada Revenue Agency. Unfortunately, unlike last year’s return where you received a nice little refund, this year you are staring a tax debt in the face. Ignoring it, hoping the CRA will forget about it, may seem like a reasonable plan, but, like any debt, it isn’t really realistic. The CRA won’t forget, and the longer you keep that paper tucked away, the more those penalties and interest amounts will grow.
Here is something you need to know: The CRA will not negotiate on principal. A CRA agent will not reduce the principal portion of your tax debt, no matter your financial situation. This is because they have no authority to do so under the Income Tax Act.
So, what can you do to deal with the tax debt?
Perhaps you’re assuming that a call to negotiate directly with the CRA is a safe bet. Knowing they won’t reduce the overall debt is one thing, but surely they’ll give you an extended repayment term, right? Sorry, not the case. The CRA is interested in retrieving their money as soon as possible, so a 5-year term just isn’t in the cards. This is one of the reasons it is best to have representation prior to contacting an agent about your tax debt.
Another reason, and arguably an even more critical one, is that any attempt to establish a payment plan will involve providing the CRA with information about where you bank, work, live, etc. If a favourable (for the CRA) plan cannot be reached, this information will later be used to obtain the funds owed – often in the form of a wage garnishment or frozen bank account – both of which can be detrimental to your livelihood.
So, options. As mentioned, an intelligent approach is to contract a tax professional with knowledge regarding CRA guidelines and methods, one who can help you reach a reasonable payment schedule without indulging that information which may later be used against you.
If you are sitting with a tax debt, the worst thing you can do is ignore it. The next worst thing you can do is call the CRA to try and get a reduction or establish a long term payment plan – both of which are fruitless endeavours. Instead, call in the reinforcements and protect yourself.
Want to deal with that tax debt and come up with a realistic settlement plan with the CRA? Tax Solutions Canada can help. Our team of ex-CRA agents will work with your individual case, looking at both payment options and any available government programs that may provide some relief. Call us today at 1-888-868-1400.