Tax Debt
Do you owe tax debt?

Are you self-employed and find yourself accumulating income tax debt and HST debt, year-after-year? Perhaps you collapsed some RSPs to do a major house repair of to help with other financial matters, which has created an unexpected tax debt to the Canada Revenue Agency.

What Can You Do About Income Tax Debt?

The obvious answer, the one that the Canada Revenue Agency would tell you, is to pay it. If you are in a position to pay your income tax debt, you certainly should. If the amount is a bit high but still at an amount that you can pay within a reasonable amount of time, you can make payment arrangements with the Canada Revenue Agency. Generally, from this writer’s experience, the Canada Revenue Agency likes to have the tax debt squared away as quick as possible but will afford you time to pay. Sometimes even up to twelve months.

Do I Have Other Options?

Outside of paying the Canada Revenue Agency on terms that are satisfactory to them, you could turn to solutions under the Bankruptcy and Insolvency Act. Making an assignment in bankruptcy or filing a proposal will give you the relief you need from the Canada Revenue Agency, especially if they are making withdrawals from your bank account or sharing in you hard earned money by way of wage garnishment.

Regardless which option you choose, the Canada Revenue Agency will expect that you become fully compliant, which means that they will expect you to file all outstanding returns, even the ones that they have provided an arbitrary assessment on.

Right of Set-Off

It is important to know that, even after filing a proposal or making an assignment in bankruptcy, the Canada Revenue Agency will still have what is called a right of set-off. This will apply to upcoming GST cheques, Trillium and other credits that the CRA will payout. This generally does not apply to the Child Care Benefit.

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