Are You Struggling With CRA Debt?

  • By Jillian Taylor-Mancusi

CRA debt

All debt is stressful, but most people would agree that owing money to the Canada Revenue Agency (CRA) is a frightening prospect. CRA debt is never ignored or written off. Collection attempts by the CRA are often aggressive and can even include wage garnishment.

If you are struggling with back taxes, don’t panic. There are resources in place that can help you get caught up on your taxes. Here’s what you need to know about dealing with CRA debt.

Request a payment plan.

While the CRA will not negotiate with you on back taxes, they will work with you to split the amount you owe into more manageable payments. Contact the CRA and ask them if you can go on a payment plan. This will allow you to pay the full amount back over a certain period of time, usually no more than a year.

There are a few drawbacks to a payment plan. Until the balance is paid off, it will accrue interest. Depending on how much you owe, this can be very expensive. Also, if you default on your payment plan, the CRA will begin collection attempts. This can include wage garnishment or a lien on your home.

Consult with a licensed insolvency trustee.

Let’s say you discuss a payment plan with the CRA, but the payments are too expensive. Or, you’ve recently lost your job and cannot afford to make any payments. If this is the case, you may need to visit a licensed insolvency trustee.

One option to discuss with the trustee is a consumer proposal. This allows you to settle your debts for less than you owe. The licensed insolvency trustee will work with the CRA and your creditors to negotiate a settlement on your behalf. Then, you’ll make a payment you can afford to the trustee.

If a payment plan or consumer proposal fail, bankruptcy may be the best option. Because tax debt is an unsecured debt, it is included in debts to be discharged. Because this can have serious financial consequences, it’s important to consider all other options first. A trustee will help you decide if this is the best option for your situation.

Both a consumer proposal and bankruptcy stop collection activity from the CRA.

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Above all—act quickly.

When it comes to CRA debt, it’s important to act quickly. Although it’s easy to ignore a notice or call from the CRA, especially if you don’t have the money to pay your taxes, it’s the worst thing you can do. The CRA will work with you, but only if you communicate with them.

CRA debt can be stressful, but it can be manageable if you follow these guidelines.

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