Tax Debt Causing Stress? Here’s What You Can Do
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- 1 Tax Debt Causing Stress? Here’s What You Can Do
- 1.1 How to Handle Tax Debt Stress
- 1.2 Understand What You Owe
- 1.3 Communicate with the CRA
- 1.4 Get if Relief if You Can
- 1.5 Debt Settlement Resources & Articles
- 1.6 What Is The Canadian Emergency Wage Subsidy CEWS
- 1.7 Will I Lose My Home or Car if I File for Bankruptcy?
- 1.8 Can Bankruptcy or Consumer Proposal Eliminate Tax Debt?
How to Handle Tax Debt Stress
Having debt can cause significant stress. This is especially true if you owe tax debt that you’re not able to pay. Tax debt owed to the Canada Revenue Agency (CRA) can be especially stressful to deal with since the agency has very strong powers to collect on debts. While other creditors might send collections agents after you if you don’t pay your debts or threaten legal action, the CRA can take significant steps without going to court.
The agency can take money owed to you by other government agencies (such as GST/HST payments), freeze your bank account, or garnish your wages all without going to court. This can obviously cause a great deal of stress. There’s also the fact that the CRA charges compound daily interest on an outstanding tax debt, meaning you’ll end up owing more the longer it takes you to pay your balance.
One of the most stressful aspects of dealing with debt is feeling unsure and worried about what will happen next. However, one way to deal with the stress associated with debt is to take control of whatever aspects of the situation you can and plan for a way to deal with your debt. Here are some ways to do that.
Understand What You Owe
If you know you owe money to the CRA, but you’re not sure how much, this can cause a lot of stress. The solution is to figure out exactly what you owe. If you have a CRA My Account profile, you can log into the site and see a summary of your tax situation. However, to make sure you have an accurate amount of what you know, you’ll need to file your taxes. If you have any outstanding returns that you haven’t filed, you’ll want to do it as soon as you can.
Sometimes, people who feel like they’ll end up owing tax debt try to avoid filing because they don’t want to know what they owe or they feel like the CRA won’t notice them if they don’t file. This isn’t true. The CRA will notify you and you will likely pay a penalty if you don’t file your taxes.
Once you file, the CRA will send you a Notice of Assessment stating what you owe (if anything). Keep in mind that the CRA may reassess your returns later. If this happens, you will receive a Notice of Reassessment.
Communicate with the CRA
If you owe tax debt that you can’t pay, it’s a good idea to contact the CRA and let them know. Depending on your situation, the agency may be willing to accept a payment arrangement where you can pay monthly instead of all at once.
However, the CRA may request significant financial disclosure from you before it agrees, so you may want to speak with a professional before giving the CRA your financial details.
Get if Relief if You Can
In some situations, the CRA may be willing to reduce or eliminate the amount you are charged in interest or penalties. In general, the agency may be willing to grant relief if circumstances outside your control prevented you from filing or paying on time. For example, relief may be granted in situations involving natural or human-made disasters, civil disturbances, errors in CRA materials, or other circumstances that prevented you from meeting your tax obligations.
The CRA may also be willing to grant relief in situations of severe financial hardship or in cases where paying the interest and penalties could make it difficult for you to afford basic necessities.
If you are considering applying for relief, speaking with a professional can be a good idea. A tax professional can help you prepare your application, giving you the best chance of having your relief application accepted.
Talk to Tax Professionals
Tax debt can certainly be stressful. In some situations, the only way to relieve this stress and improve your situation is to work with a professional. As mentioned, a tax professional can help you negotiate a payment arrangement with the CRA or apply for relief.
If paying your tax debt isn’t financially possible for you, a Licensed Insolvency Trustee can help you understand the debt relief options that may be available. For instance, the tax debt can be included in legal processes such as consumer proposals and bankruptcies. Most trustees offer a free consultation where they will review your situation and give you details on the available options.
Debt Settlement Resources & Articles
What is CEWS in Canada? Retailers in Canada who have seen a drop in revenue due to the pandemic may be eligible for a subsidy to cover part of their loss. See how you can apply
Will I Lose My Home or Car if I File for Bankruptcy?The goal of the bankruptcy process is to provide people who are struggling with debt with an option to eliminate those debts and start fresh. What Occurs to your Home or Car if you Declare...
Two processes that could be eliminate your tax debt are consumer proposal and bankruptcy. Learn about these two debt management options and let LIT select which is the best for you.
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