It’s nearly that time of year again — tax time. The income tax deadline is looming and Canadians need to file their taxes to the Canada Revenue Agency. But, if you already know you’ll owe a tax debt that you can’t afford to pay, how do you determine what the best course of action is to take?
DO confirm how much you will owe.
Have you made claims in all of the areas you are eligible to? Have all your past returns been filed? Were all eligible claims made when you filed those years too? Getting a clear number of what you will need to pay will help you know what options you’ll qualify for.
DON’T delay filing.
When you know you’ll owe a tax debt — especially if you can’t afford to pay it — it’s tempting to want to ignore the situation and not file at all. But, missing the income tax deadline when you owe money is about the worst thing you can do. Not only does it not make your situation better, it actually leaves you worse off (when it comes to negotiating a settlement with the CRA).
In addition to the tax debt you would have owed, you may also be liable for late filing fees and penalties if you miss the income tax deadline. You’ll also be subject to higher late fees and penalties if you miss filing again in the future. Not only do late fees and penalties can add up quickly with the Canada Revenue Agency, when you don’t file on time, they’ll also keep you on their radar, report you to the credit bureau, and/or send collections agencies after you.
DO speak to a financial consultant about outstanding tax debts.
If you’ve missed filing in the past or if you had a tax debt and didn’t pay, speak to a financial professional who routinely helps people with tax problems, knows exactly how to deal with the CRA, and can provide solid advice about what you should do. A Licensed Insolvency Trustee is qualified to do this.
DON’T assume there is no help available.
If you will owe, it is better to get financial advice BEFORE you speak directly to the Canada Revenue Agency. Do not disclose information to the CRA or attempt to make financial arrangements until you work with a professional who knows your rights first. Once they understand the details of your individual situation and your ability to pay, and LIT can advise you on what arrangements the CRA may or may not accept.
Ignoring your tax debt won’t make it go away. With the income tax deadline looming, you’re best to take proactive action — find out how much you’ll owe and seek financial advice for how best to pay it off. This will put you back in control of your finances and stop a bad, but fixable, situation from becoming unmanageable.
If you will owe a tax debt, Spergel’s Licensed Insolvency Trustees can help you determine the best way to move forward. Simply contact us to ask our team a question, book a Free Phone Consultation using the calendar below, or keep reading more about Tax Debt.