The CRA, or Canadian Revenue Agency, is a revenue service of the Government of Canada. They collect taxes and administer tax laws and policies. As working Canadians, many of us know what the CRA is. For some, it’s a yearly reminder to file our taxes. For others, the acronym is a big, scary taxman knocking at your front door, ready to collect your tax debts. But ignoring your debts won’t make the problem disappear. When you have debt, it’s important to have a plan to pay it off and to face creditors right away. Don’t let your debt grow until it is out of control. Yes, it can be stressful and overwhelming dealing with financial issues such as debt, but it needs to be done if you want to see a resolution that allows you to move forward. When many of our clients start working with us, part of their debt can be money owing to the CRA.
These are 4 frequently asked questions we receive about paying tax debt to the Canada Revenue Agency.
- How do I pay back tax debt?
There are a variety of payment options available for you to pay off your tax debt. From online banking to e-transfers, to cheques, the CRA accepts payments in many different forms. As we always recommend, it’s best to tackle the debt you owe with the highest interest rate first. A higher interest rate means you will be paying more for that debt in the long run, so it’s better to eliminate those first. If your tax debt has a high-interest rate, and you can pay the amount upfront, it’s best to pay it off in full right away.
2. What do I do if I am unable to pay the full amount?
If you can’t pay off the full amount right away, the CRA does allow you to make partial payments. However, your debt will gain interest until you pay off the full balance. For you to make partial payments, you will need to apply for a payment arrangement with the CRA. If you can show that you have tried to pay the full amount of your tax debt, but were unsuccessful, the CRA may then consider a payment plan for you. They will assess your situation to determine what you can afford and how long your payment arrangement will need to be. When you set up a payment arrangement with the CRA, you will need to make those payments on time and to report any changes to your payment arrangement as they come up.
3. What are the consequences of not paying?
If you avoid payments or if you cannot continue with your payment arrangement, the CRA will proceed by taking legal action against you. However, the CRA must do the following before they can take legal action:
- Attempt to give you a verbal warning via phone call.
- Send you a written legal warning letter.
To avoid any legal action being taken against you, it’s best to repay the debt or call the CRA to see what your options are. As tough as these conversations may be, having them early on will create less stress than if you wait until they leave you multiple messages day after day.
4. What are my options?
When it comes to debt repayment, you have options, but ignoring your debt is certainly not one of them. Offered by the Government of Canada, there are taxpayer relief provisions you can explore. However, before you choose bankruptcy or one of these other debt-relief options, talk to a debt-relief specialist at 4 Pillars. Unlike most companies offering debt-relief solutions, we work for you and ONLY you. We can show you a variety of options without you having to claim bankruptcy to help eliminate your debt. Working together we can create a debt restructuring plan so you can send the taxman at your front door packing. At 4 Pillars you will have the best chance at debt freedom, stress-free! Give us a call at one of our 3 locations today to get started. You can reach our Muskoka & Parry Sound office at 705-640-0187, our North Bay office at 705-980-0158, or our Sudbury office at 705-806-1252. Stop letting debt control your life — take the first step today!