Dealing with Canada Revenue Agency (CRA) Debt
by Gene Frendo
A popular misconception I often hear is that, in Canada, tax debt is unlike any other debt and cannot be reduced or discharged under any circumstances regardless of the financial situation of an individual or the hardships that a taxpayer may have experienced.
It is likely this misconception exists because of our proximity to the United States and the resulting exposure to American media. The American insolvency system is governed by an arguably more complicated set of rules when it comes to this matter and as result, U.S. government tax debt may not be discharged in many cases.
I just don’t think I can pay what I owe.
The Canada Revenue Agency (CRA) does have a program in place to allow a taxpayer to apply for the elimination or reduction in penalties and interest in certain circumstances, but this can be an uncertain process at best and success is generally based on extraordinary circumstances. The Bankruptcy and Insolvency Act does provide for the financial rehabilitation of an honest but unfortunate debtor and, in Canada, this generally includes debt owing to CRA for income tax and HST/GST.
I don’t agree with what CRA says I owe.
Certainly, if there is any dispute as to the validity or amount CRA is claiming as owing, there are programs in place to object or appeal such decisions. However, if the amount assessed is not in dispute and there is no real practical way of paying the amount in any reasonable amount of time, then you may wish to consider bankruptcy or making a proposal to CRA and other creditors through a Licensed Insolvency Trustee.
Either one of these options stops the interest and penalties from continuing to escalate, removes garnishment of wages, and the threat of further legal action against income or property.
Denial and avoidance can be just as taxing as dealing with your debts head on.
This is the time of year that people are reminded of their obligations to the CRA. It is important to make sure you file your taxes and know where you stand with them. Sometimes it is tempting to live your life like the proverbial ostrich and the saying “what you don’t know won’t hurt you,” but that is simply not true when it comes to dealing with your tax situation. In fact it will, ultimately, only make the situation worse.
If you are concerned about your ability to meet your obligations regarding your tax debt and could use a second opinion before deciding what to do next, call 289-273-2841 or email us at Frendo and Partners to schedule a free, no-obligation consultation.