During the pandemic, the Canadian government recognized the widespread financial difficulties suffered by its citizens due to strict lockdown restrictions. To help alleviate this, the Canada Revenue Agency (CRA) suspended some activities, including collections on some of the tax debt owed to them. One of the reasons the CRA halted the sending out of collection notices, was to prevent exacerbating the dire financial situations of some Canadians struggling with the pandemic’s impact. However, this action didn’t eliminate tax debt, it simply suspended collection activity, which means people still owe it and will continue to accrue interest on it.
As the pandemic is nearing its second year anniversary, CRA has started to resume collections, which means that debtors will be expected to commence repaying their tax debt and overpayments again shortly, if not already. However, some people continue to struggle with their payments and their financial circumstances have not improved due to circumstances out of their control. This often leads to debtors wondering what they should do if they owe taxes to the CRA. If you’re in a similar situation, here’s some things to consider:
1. File Your Taxes Right Away
Even if you can’t pay your taxes in full, be sure to stay “compliant” complete your tax return as soon as you can. Completing your taxes on time will help you avoid penalties for late filing, which can easily cause your debt to balloon. You can also consult with Licensed Insolvency Trustee in London to help you figure out your options and arrange a payment plan to compromise or extend your outstanding payments if you are unable to do so on your own.
2. Use the CRA’s Payment Arrangement Calculator
To find out how much you owe and how much you can afford to pay, check the CRA’s Payment Arrangement Calculator (PAC) and their Monthly Net Income and Expense Worksheet, known as “the worksheet.” With these tools, you’ll come up with different payment arrangements with the CRA that will allow you to pay off your taxes faster, avoiding the stacking of interest rates. You can also use it to spread your payments out more to reduce its impact on your financial situation.
However, you’ll need some information handy when filling out the PAC. This includes how much you owe, the date of your first payment, how frequently you’ve paid, the interest rate for your back taxes, your monthly income, and more.
3. Reach Out to the CRA
Once you complete your taxes and check the PAC, contact the CRA directly. You can work with them to establish a payment arrangement that will pay off your debt efficiently. It’s important to note that the CRA can still take money out of your benefits, refunds and credits to cover the money you owe, even with a payment arrangement. Be sure to ask them if or how they will do this so you can account for these garnishments in your monthly budget.
What If You Can’t Pay Your Taxes?
However, if you still can’t pay your taxes despite your best efforts or you aren’t able to fulfill the CRA’s request payment plan, contact a Licensed Insolvency Trustee and explore your options.
They can review your situation and determine if you just need help budgeting and managing your expenses or if you need professional help through a bankruptcy or a consumer proposal. Having a licensed professional by your side will make the process less daunting, as you’ll be more empowered to make decisions that will efficiently get you out of debt as soon as possible.
Remember that tax debt CAN be included in consumer proposals, proposals and bankruptcies. A licensed Insolvency Trustee can help you navigate your financial issues and will likely be able to help you find a solution that works for you so that you don’t continue to worry or struggle.
Many Canadians have struggled to pay the taxes they owe due to various circumstances exacerbated by the pandemic. By following these tips, you’ll soon find a resolution to your issues with tax debt, putting you back on track to a stable financial future.
If you’re looking for help with your tax debt in London or if you want to review your options and learn about consolidation loans, debt management programs, proposals, consumer proposals and bankruptcies, we at Paul J. Pickering and Associates Limited are here to help you. We have over 30 years of experience in helping our clients resolve their financial problems. Whether you’re starting to get overwhelmed and you don’t know how to handle your debts and minimum payments, contact our office today for your free initial consultation, and we’ll put together a plan that will work for you!