Taxes debts can affect anyone. From self-employed individuals owing HST, Source Deductions, and personal tax; individuals who have cashed out their RRSPs or are working multiple jobs without adequate withholdings; and pensioners owing taxes for the first time in their lives as their pensions did not have enough taxes taken off resulting in tax debts too large to manage on a fixed income.
CRA Has Strong Powers of Collection
For some, their annual income tax return results in a debt that, combined with other financial obligations, becomes insurmountable.
The Canada Revenue Agency (CRA or formally Revenue Canada) has the powers to force collections of tax related debts - including wage garnishments, freezing bank accounts, investment seizures; they may even register a lien on a residential home.
Bankruptcy Act and Tax Debts
- Stop wage garnishments
- Reverse frozen bank accounts
- Keep HST/GST and child tax credits
- Remove property liens
By filing a bankruptcy or consumer proposal under the Bankruptcy & Insolvency Act a Licensed Insolvency Trustee can gain an automatic stay of proceedings which will immediately stop these actions. In the case of a consumer proposal, this allows you the time to negotiate an acceptable payment arrangement with CRA.
Options When Dealing With Tax Debts.
We can work with you to arrange a repayment plan with CRA. You need a plan that CRA will accept and that will fit with all your other monthly commitments.
- Apply for CRA Fairness – a government program that could reduce the interest and penalties, but not the principle portion,
- File a consumer proposal, or
- File personal bankruptcy.
Here is a short video where Howard Hayes, an LIT at Hoyes Michalos, explains how a consumer proposal can eliminate tax debts where an informal proposal cannot:
Our trustees are experts in issues surrounding ways to find relief from overwhelming tax debts. Here are some additional resources written by our team of Licensed Insolvency Trustees:
- Tax Debts and Bankruptcy
- What happens if I haven't filed my tax returns?
- How to make a deal with Canada Revenue Agency (Revenue Canada)
- How to file a proposal to Canada Revenue Agency
- What are my options if Canada Revenue Agency places a lien on my house for unpaid taxes?
Tax Debts Are Like Any Other Debt
One common misconception that people have is that tax debts are different from their other debts and have special rights – this is only partially true: Tax debt is governed by tax laws, and as such there are special rules. While the CRA does have significant collection powers compared to other creditors when it comes to a consumer proposal or personal bankruptcy, taxes are generally dischargeable debts (i.e. they go away upon completion of the procedure) just like your credit card debts, bank loans, or other unsecured debts.
If you owe tax debts to Canada Revenue Agency request a free confidential consultation with a Hoyes Michalos debt solutions expert. We can help you eliminate penalties & interest and reduce the amount you have to pay.Eliminate Tax Debt