There is only one way 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 tax debt owed, you must file a Consumer Proposal to Revenue Canada through a Licensed Insolvency Trustee.
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 CRA consumer debt proposal 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 debt 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.
CRA debt and consumer proposal
In a consumer proposal taxes are considered to be an unsecured debt as long as the CRA has not issued a lien against your property. It, along with other debts like credit card debt, can be reduced by filing a proposal to your creditors. As long as the majority of your creditors, by dollar value, vote to approve the proposal, CRA must comply. If tax debts form a major portion of your debts, we have the experience to help you craft a proposal that the CRA is more likely to approve.
To file a CRA debt consumer proposal to Canada Revenue you must contact a Licensed Insolvency 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.