There is only one possible method to get Canada Revenue Agency (previously called Revenue Canada) to accept less than the full amount owed for taxes. To make a deal for less than the full amount owed, you must file a Consumer Proposal to Revenue Canada.

In a proposal to creditors, all creditors are offered the same “deal”, and the “deal” must be better than they would receive if you were to file for personal bankruptcy.

In order for a debt proposal to the Canada Revenue Agency to be accepted, there are certain CRA debt forgiveness rules to consider.  Your proposal it must contain the following terms:

  • All tax returns must be filed and up to date prior to the filing of the proposal.
  • All tax returns due during the proposal period must be filed when due.
  • All taxes owing during the proposal period must be paid as they become due. (The consumer proposal will only include taxes owed for taxes that were filed prior to the proposal date).
  • In the event that taxes for prior years are re-assessed and a refund is due, that refund must first be applied to Revenue Canada’s outstanding indebtedness.

In certain circumstances, Revenue Canada may require additional terms.

Why Will CRA Only Deal Through a Consumer Proposal?

Canada Revenue Agency has these tax forgiveness rules in place to ensure that all of your assets are disclosed, and that all debts are being treated equally. The only way they can ensure this is by requiring consumers to file a formal proposal to the CRA. They are not willing to enter into an informal debt settlement, nor will they accept a debt management plan through a credit counselling agency for less than the full amount owed.

As a Consumer Proposal is a complicated procedure, to file a proposal to Canada Revenue you must contact a licensed Trustee. At Hoyes, Michalos & Associates Inc., we offer a free consultation to assist you in determining your best course of action. Please contact one of our Bankruptcy Trustees in Ontario today, they are happy to help.

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