What you must know if you owe Canada Revenue Agency or expect to owe after filing your next return.
If you owe Canada Revenue Agency (CRA) now for personal income tax, CERB or other overpayments or expect to owe upon filing your 2022 tax return this coming spring, it would be best to prioritize repayment before CRA contacts you.
If you receive a call or letter from CRA looking for repayment, it is important to contact them as soon as possible to discuss a repayment arrangement. CRA will look for payment in full and if this is not possible, they might request a letter from your bank confirming you applied for a loan to pay them but were denied. If it is clear, you cannot make payment in full, CRA will entertain a payment arrangement. If you can pay the full balance in 12-months or less and it appears you will not continue to owe in future tax years, CRA will likely accept the arrangement, however, if they believe you have the means to pay it sooner, they may insist you do so.
Before accepting a payment arrangement, CRA may ask you to supply them with proof of income, expenses and other debt payments. You may claim that you can only afford to pay a certain amount towards your CRA debt, however if a review of your income, expenses, and other debt payments leads them to believe you can pay more, they will expect you to pay more. If CRA expects you to pay more and you do not, they could try to take the amount they expect to be paid by force, such as a garnishment against wages. Before accepting a payment arrangement, CRA might also want to consider your household income. You and your partner may split household expenses 50/50 but if your partner earns a higher income, CRA could decide to pro-rate household expenses according to income and ask that you pay more according to their calculations. If you own a home and cannot repay your tax debt within a timely manner, CRA might look to secure repayment by registering a judgment against your property until the debt has been full paid. Once a judgment is registered against your property, a sale or refinance of the mortgage might prove difficult unless CRA will be paid in full from the proceeds.
If you receive a call or letter from CRA regarding payment and you do not respond within a timely manner, CRA may proceed with collection action without any further attempt to contact you. This collection action could include the garnishment of wages or your bank account. If CRA sends a garnishee to your bank, it will effectively freeze your account so you will not have access to the funds in your account and if you have upcoming payments scheduled, these payments will not be honoured. CRA can take legal action quicker than most other creditors so if you owe, it is imperative you address it as soon as possible. Once a garnishment of wages is in place, the onus is on you to prove to CRA that you cannot afford the amount they are taking from your pay, otherwise the garnishment will likely remain until you have paid the balance owed or filed a Bankruptcy or Proposal. The filing of a Bankruptcy or a Proposal will require creditors, including CRA, to cease all legal and collection activities.
If you are already struggling with debt and have limited or no ability to pay anything additional, it would be a great idea to consider options for dealing with your debt.
If you are looking for advice, or a second opinion about your debt, it does not cost anything to talk about your options. Every financial situation is unique and viable options can differ from person to person. A conversation free of judgment and cost, is the first step to determine options for debt that make sense for you. For a free consultation, please call or text (506) 645-1814 or email jaime@tackledebt.ca; or visit www.tackledebt.ca.