When it comes to debt you owe the CRA, Red Deer residents need to know there is a big difference between what you may owe a credit card company and what you owe the CRA. For some residents of Red Deer, CRA is the bill that keeps being put off.
You have undoubtedly heard television commercials from debt solution companies and credit counseling agencies promising to cut your debt in half. CRA debt is not something these people can help you deal with. The CRA will not negotiate settlements with any of these professional debt solution providers.
However, in some cases, they will negotiate directly with you. In addition, there is an option called a consumer proposal where the CRA may negotiate with a licensed bankruptcy trustee. We will have more to say about these two options in a moment. Right now, you just need to know credit counselors and debt solution companies cannot help you with CRA debt.
CRA debt differs from credit card debt in collection attempts as well. A credit card company has to work through the court system to initiate wage garnishments or property attachments against you. The CRA can initiate these methods as an administrative proceeding.
So what can you do if you have tax debt you owe, but cannot pay? Here are seven things you need to know about dealing with CRA debt.
- You may not owe as much as you think.
- You need to take advantage of every tax deduction available to you.
- You can ask the CRA Fair Practices Commission for a waiver of interest and penalties.
- You can work directly with the CRA to set up a repayment schedule.
- You can try to get a loan to pay your CRA debt.
- You can file a consumer proposal to reduce your CRA debt.
- You can declare personal bankruptcy to eliminate your CRA debt.
First, many Canadians who get behind with income tax debt pay little attention to their filings. Some do not file at all. The CRA does not know the details of your financial situation so the amount they say you owe may be wrong. This is almost always the case if you are able to take deductions but have failed to do so.
Second, you need to do whatever it takes to ensure you are taking advantage of every possible deduction. If you have friends or relatives with accounting expertise, ask for help. Pay a professional tax preparer if you can afford it. There may be community services agencies you can turn to for help at little or no charge if you cannot afford professional advice.
Third, if you are in trouble due to circumstances beyond your control, the CRA maintains a Fair Practices Commission that can waive the interest and penalties that have been added to your original debt. These circumstances include job loss, medical emergencies, and natural disasters.
Fourth, if you can pay what you owe in 12 months or less, the CRA might be willing to negotiate a payment schedule, although interest and penalties will continue to accrue.
Fifth, if you have equity in your home or another source of collateral you could take out a loan to pay off your Red Deer CRA debt.
Sixth, the Bankruptcy and Insolvency Act of Canada contains a provision called a consumer proposal that allows debtors – working with a licensed bankruptcy trustee – to pay back their creditors less than the total owed over a five-year period. Under a proposal, your CRA debt is treated the same as your other unsecured debt. It is the only option you have to reduce what you owe the CRA.
Seventh, you can declare personal bankruptcy and your Red Deer CRA debt will also be treated the same as your other unsecured debt. To determine if a consumer proposal or a personal bankruptcy is the only option you have for dealing with your CRA debt, meet with a licensed Red Deer bankruptcy trustee as soon as possible.
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