Does the Canada Revenue Agency Forgive Debt?

How do you handle your income tax payments? Many employers withhold income taxes on your monthly paycheck, while others pay you in full and expect you to manage your own taxes. This can be problematic if you don’t set something aside for tax time.

When paying your income taxes, you are expected to file your taxes on time and pay in full or face serious consequences. The Canada Revenue Agency does not forgive income tax debt, but there are options to help you to manage your debt better.

What Should You Do If You Can’t Pay Your Tax Debt?

If you cannot pay your taxes due to financial hardship, it is important to contact the Canada Revenue Agency to inquire about taxpayer relief provisions.

They will assess your financial situation to determine if you can pay your debt by either reducing your expenses or taking out a loan. If they determine you can’t pay your taxes, they will set up a monthly payment arrangement that will allow you to pay your taxes over a set period.

CRA Income Tax Payment Arrangement

Once your payment arrangement is set, it is important that you follow the payment schedule and make your payments on time. If you fail to make your payments, you will be subject to penalties and interest charges. The CRA may also take legal action to recover the balance of your debt.

What Happens if You Don’t Contact the Canada Revenue Agency

If you don’t contact the CRA to advise them that you can’t pay your taxes or you miss a payment on your payment arrangement, they may take legal action to recover the debt. They may do this by:

Garnishing your wages or other income
Putting a lien on your assets
Seizing your property

Get Credit Counselling to Better Manage Your Finances

You may benefit from credit counselling if you are struggling with income tax debt repayment. At Fox Miles & Associates, we can help you to manage your finances by:

Assessing your monthly income and expenses
Creating a realistic budget to manage your spending better
Discussing debt solutions

Debt Relief Options

Your licensed insolvency trustee can outline ways to reduce your debt so you can better manage your tax debt. These options include debt consolidation, a consumer proposal, or filing for bankruptcy.

Debt Consolidation

If you are currently juggling several sources of debt, such as credit card debts, payday loans, income tax debt, or other small loans, you may want to consider consolidating your debt. In this debt consolidation process, you will apply for one large loan to pay off all your smaller debts.

You can make your finances easier to manage by streamlining your debts, so you have fewer payment dates with varying interest amounts and fewer creditors to pay. In order to qualify for a debt consolidation loan, you would need to have a good credit score and provide an asset with which to secure your loan.

Consumer Proposal

If you are unable to qualify for a debt consolidation loan or are still unable to make the repayments on the loan, you might choose to file a consumer proposal. With this process, we will negotiate with each creditor on your behalf to reduce the outstanding balance of your unsecured debts. If successful, this process could reduce your debt by up to 80% so you can better manage your tax repayment.

File For Bankruptcy

While the CRA does not forgive your income tax debt, filing for bankruptcy removes the burden of debt repayment and puts it in the hands of an insolvency trustee. They will liquidate your assets and take a portion of your monthly income in order to pay off your outstanding debt, including your income tax.

CRA Debt Forgiveness Advice From Your Edmonton Insolvency Trustee

If you are looking to get advice about CRA debt relief, contact the licensed insolvency trustees at Fox Miles and Associates. We offer a free consultation so you can find solutions to your debt problems.