Taxpayers are often overwhelmed by a tax assessment or Tax Statement of Account showing a balance owing that seems impossible to pay. However, ignoring the problem is not the solution and can lead to severe consequences.
This article provides actionable steps to address and resolve CRA tax debt.
What Happens if I Ignore CRA?
A CRA tax debt cannot be ignored. If the CRA has assessed you for income taxes or GST/HST owing and you fail to make acceptable payment arrangements, the CRA collections officer will initiate enforcement actions.
Ignoring CRA notices will not make the problem disappear and will only escalate the severity of the situation.
What Can CRA Do to Enforce Payment of My Tax Debt?
CRA has extensive powers to enforce collection, including:
- Bank Account Seizures: CRA can freeze and seize funds in your bank accounts.
- Wage Garnishments: CRA can directly deduct amounts from your salary.
- Accounts Receivable Garnishments: If you’re self-employed or operate a business, CRA can seize payments owed to you by clients.
- Liens on Property: CRA can register a lien on your real estate, restricting its sale or refinancing.
- Seizure and Sale of Assets: CRA can seize and sell personal property, including vehicles or equipment.
How Should I Deal with a CRA Collections Agent?
Dealing with CRA collections officers on your own can be intimidating and counterproductive. CRA agents are trained to recover as much as possible as quickly as possible, often using aggressive tactics. They may provide incomplete information about your rights or options.
Key Advice: Retain a tax professional to handle communications with CRA. A tax professional will act as your representative, ensuring that your rights are protected and the best possible resolution is achieved.
How Can I Resolve My Tax Debt with CRA Collections?
- Challenge the Assessment:
If you believe the tax assessment is incorrect, a Notice of Objection can be filed to dispute it. This must be done within the prescribed deadline, usually 90 days from the date of the assessment. - Negotiate a Payment Arrangement:
If the assessment is accurate, negotiate a payment plan with the CRA. A tax professional can help you propose a reasonable payment schedule that aligns with your financial situation while preventing enforcement actions like bank seizures or wage garnishments. - Address Existing Garnishments or Seizures:
If CRA has already garnished your wages or seized your bank account, a tax professional can work to have the garnishment lifted or the account released once an acceptable payment arrangement is in place. - Taxpayer Relief Application:
If penalties and interest have significantly inflated your tax debt, a Taxpayer Relief Application may help reduce or eliminate these amounts. This application is reserved for situations like financial hardship, CRA errors, or extraordinary circumstances.
What If I Can Never Pay Off My Tax Debt?
If the tax debt is too large to ever repay, bankruptcy or a consumer proposal may be the best solution. A licensed insolvency trustee can help you explore these options to eliminate the tax debt legally and start afresh. Bankruptcy should always be a last resort, and a thorough review of all other options is advisable before proceeding.
Tax Tips for Dealing with CRA Collections
- Act Immediately: The earlier you address your tax debt, the more options you’ll have.
- Seek Professional Help: Tax professionals can navigate CRA processes, represent you effectively, and negotiate better outcomes.
- Avoid Delays: Delays can result in compounded penalties, interest, and enforcement actions.
Conclusion – Take Control of Your Tax Debt
A CRA tax debt can be overwhelming, but ignoring it will only lead to more severe consequences. With the right professional assistance, you can challenge incorrect assessments, negotiate manageable payment plans, or seek relief from penalties and interest.
If you’re dealing with CRA collections or have questions about your tax debt, consult a tax professional to explore your options and regain financial control.
This article is written for educational purposes.
Should you have any inquiries, please do not hesitate to contact us at (905) 836-8755, via email at [email protected], or by visiting our website at www.taxpartners.ca.
Tax Partners has been operational since 1981 and is recognized as one of the leading tax and accounting firms in North America. Contact us today for a FREE initial consultation appointment.
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