April is tax time and, for some people, that can mean large tax bills. This is especially true for anyone who hasn’t paid previous tax bills on time, people who have not properly filed their taxes in past years, self-employed persons and many others. If you find yourself owing a large amount to the Canada Revenue Agency (CRA), you may not have the money to pay it. Even if you set aside money during the year to pay your taxes, it might not be enough. You may be wondering how you’re going to deal with this unfortunate debt situation. Unfiled or unpaid income taxes, HST, PST and GST payroll taxes can very quickly become very expensive and the longer you wait to pay them, the more expensive it can get. Some people avoid filing or attempting to pay their taxes because they are overwhelmed by the process and the amount of debt. This can result in a number of problems. The CRA can seize your assets, garnish your wages, freeze your bank accounts or register liens against your property if they are owed money. This means YOU CANNOT AVOID dealing with tax debt. If you are in this situation, you need to realistically assess if and how you will be able to pay these debts. Keep in mind that, if you haven’t paid your taxes on time, penalties and interest charges could apply. These can make it even more difficult to pay back what you owe. So what should you do to get out of tax debt?
Paying Your Tax DebtIn some cases, individuals cash in RRSPs or RESPs in order to pay their tax debts. This may not be the best course of action. In fact, for most people, cashing in your RRSPs in order to deal with other debts is the wrong decision. Why? Under a consumer proposal or a bankruptcy, you can protect your RRSP. Other than contributions made in the last 12 months, you won’t lose the money in your RRSP if you are forced to declare bankruptcy. This fact is important to consider if you are thinking of using the money in your RRSP to pay down a tax debt. It might be a better strategy to keep your money in your RRSP, and work out another arrangement to help you settle your CRA debt.
Working with a Debt Relief ProfessionalIt is important that you consult with a qualified debt relief professional before taking action. A knowledgeable debt expert will be able to assist you, and advise you on the best course of action. Keep in mind that lawyers and accountants are unable to assist you with strategies for paying down your debt. They are only able to help you with any interest and penalties that you may incur. This doesn’t solve your main problem, which is the actual debt itself. A licensed debt professional, like A.Farber & Partners, can help you with your actual tax debt problems. With the help of a Licensed Insolvency or a Proposal Administrator, you can learn more about the options that are available to you and figure out which option is the best for you to get out of debt.
Bankruptcy May Not Be Your Only Option!In some cases, a Consumer Proposal or Settlement offer can allow you to repay your debt on a schedule that works for you, while at the same time eliminating part of your debt - even up to 70%! We can assist you with eliminating your tax stress, paying down your debt and getting a fresh financial start. We can help you take control of your debt and develop a plan for eliminating your tax debt.
Read More About Tax Debt And The CRA
- Canada Revenue Agency Income Tax Questions - CRA FAQ