Dealing with income tax debt in Canada
If you haven't filed your taxes and you owe money to the Canada Revenue Agency (CRA), you are not alone. In fact, unpaid taxes represent a significant amount of the debt many people have.
Unpaid income tax can be stressful. The CRA has the power to withhold HST/GST and child tax credits, seize money in your bank account and garnish your wages. The CRA can also continue to charge penalties and interest on the money you owe until your debt is paid in full. As a result of this power, many people are intimidated and unsure of their options when dealing with the CRA.
If you have not filed your tax return(s) as required, the first step is to gain a better understanding of your tax debt situation. It may seem daunting, but you must make sure to complete and submit all outstanding tax returns. There is easy-to-use, fairly affordable software available, or an easy-to-use guide offered by the CRA. Once you have a better understanding of what you owe, you will be better prepared to make an informed decision about how to deal with your tax debt.
Options for dealing with income tax debt
Review all of your returns for the past several years to make sure you are taking advantage of all possibilities to reduce what you owe; professional help from an accountant or tax preparation service could be a good investment, unless your case is very simple
It may be possible to negotiate with the CRA about the amount of tax you owe by filing a consumer proposal. Based on a practical assessment of what you can pay, a trustee will help you propose a payment plan that is feasible for you and acceptable to the government
If you have determined that you are unable to meet your debt obligations to the government, your final option to resolve your income tax debt is filing for bankruptcy. We recommend contacting your BDO bankruptcy Trustee to review your situation and confirm that your tax liability will be discharged if you go bankrupt
Dealing with the CRA and your tax debt can overwhelming. Our BDO team can outline your options and help you find a solution to manage your CRA-related debt.
For complete information, and to answer your questions thoroughly, we encourage you to contact your local BDO office or request a call.