Overdue income tax can be stressful. Most people aren’t sure of the right thing to do when they haven’t paid what’s owing or filed their tax returns. Dealing with the CRA (Canada Revenue Agency) on your own can be very intimidating. If you don’t pay the tax debt CRA can garnish your wages, seize the money in your bank accounts, and withhold HST and child tax credits. The agency can continue charging interest and penalties on what you owe until your tax debt is fully repaid.
Always remember that the unpaid tax debt represents a significant amount of the debt you have. Thus, if you haven’t filed your tax returns as required by the CRA, then you don’t have options when it comes to repayment of the debt.
The most important thing is to understand your tax debt better. You can do this by completing and submitting the outstanding tax returns. It may sound overwhelming, but it will help you know the exact amount you owe. These details will also help you prepare to manage the debt.
It’s also wise to review all your past returns. Make sure you’re taking advantage of all the possibilities of minimizing the amount you owe. You may consider seeking advice from a professional tax lawyer in case you aren’t well-versed with tax-related terms.
Sometimes, people fail to pay taxes because of reasons and events beyond their control. If you couldn’t clear your tax debt because of serious illness, loss of employment, natural disaster or any other similar event, you can apply for tax relief provisions. If you’re eligible, all your interests and penalties will be waived or canceled.
If you can’t afford to repay your tax debt, here are some of the viable options.
You can consider negotiating with the Canada Revenue Agency about the overdue tax amount by filing a consumer proposal. It’s also wise to consult a local debt professional. This expert will assess your situation and help you create a debt repayment plan that is acceptable to the federal government and practical for you as well.
Read more about the consumer proposal; find out how you can qualify, how you can benefit from it, and the best way and time to file it.
If you are absolutely sure that you can’t repay your tax debt probably because you are facing a financial crisis, consider filing for bankruptcy. Keep in mind that bankruptcy cases are usually complex and sometimes expensive. Therefore, you must understand all the laws and regulations regarding bankruptcy before filing the case.
Also, hire a bankruptcy lawyer to advise you on the right time to file for bankruptcy, how to file it, and what should be done to get all your tax debt debts and other consolidated debts cleared. Lastly, filing for personal bankruptcy will have a negative impact on your credit score. Before you file for personal bankruptcy, find out if you’re comfortable with a bad credit score.