Both the personal and business tax deadlines have now passed, and that means that most people have either received their refund or an assessment indicating tax debt is owing. If you’re in the latter category, and are struggling to come up with the funds to pay the Canada Revenue Agency (CRA), you may be best served by speaking with a Licensed Insolvency Trustee (LIT).
Why? When you owe a tax debt, CRA collections can be relentless. When your file gets assigned to an agent, that agent will use their best efforts to collect. This will likely include calling you and/or sending you letters demanding repayment.
In most cases, there are 4 different stages to CRA collections:
- Step 1 – CRA collections will demand payment. If you pay, great – all further action stops. If not, move on to step 2.
- Step 2 – If you fail to pay, the agent assigned to your case will begin contacting you to try and find out as much as they can about you.
- Step 3 – Once you have engaged in a dialogue, the agent may try to negotiate with you if you provide further information. They may offer to consider a payment plan. They will provide you with a financial disclosure form asking you to disclose where you live, work, bank, monthly income and expenses, debts, and assets.
- Step 4 – If you can’t make a payment arrangement that they will accept, or are forced into one you cannot afford, thus missing payments, the last step is for the CRA collections department to take action. Remember that financial disclosure form? It now proves very handy for that agent:
- Your banking information will be used to freeze your account
- Your employment information will be used to garnish your wages
- Your housing information will be used to place a lien on your home
The best thing to do if you have a tax debt that you know you can’t pay is get professional advice as soon as possible. A Licensed Insolvency Trustee can go through your finances and help you determine the best financial plan for your situation. When some people think of a Licensed Insolvency Trustee they think of bankruptcy, but bankruptcy isn’t the only solution that they can bring forward and often bankruptcy doesn’t end up being the right solution. Your plan must consider your current situation and future financial goals.
Act fast, because depending on what enforcement action CRA deploys, not doing so may lessen your negotiating power in the future.
Want to deal with CRA collections before things get worse? Spergel can help.
Schedule a free consultation today by calling toll free 310-4321.