Help with CRA debt

Posted on 16 April 2022

Written by Colin Boulton

CRA debt refers to tax debt owed to the Canada Revenue Agency (CRA). Sometimes, it can be difficult to pay your taxes and we understand just how stressful this can be. Tax debt can accumulate over the years, making it difficult to repay. In these instances, there are options to gain tax debt relief, so you do not need to panic. At Spergel, we are here to help you no matter how bad you may consider your financial situation to be. When it comes to help with CRA debt, the most important point is to not ignore your debt and to act as quickly as you can. This is because ignoring tax debt can cause tax penalties and interest charges to accumulate. The CRA has severe powers to collect their taxes too, including seizing money from your bank account and pursuing a wage garnishment against you. The best action is to work with the CRA or a Licensed Insolvency Trustee to review your options and figure out a plan to gaining tax debt relief.

How to repay your tax debt

In order to repay your tax debt, there are a number of steps you should take. We’ve laid these out below:

  • Understand exactly what you owe – ensure all your tax returns are up to date so that you can gain a clearer picture of exactly how much tax debt you have
  • Work with the Canada Revenue Agency – keep them informed of your circumstances and arrange a payment schedule for repaying your tax debt, keeping in mind any additional interest payments that will be charged on your outstanding balance
  • Make partial payments – you can work on reducing the amount of interest owed for your remaining debt without the need to pay in full. Discover more payment options at canada.ca/payments
  • Make a payment arrangement with the CRA – if you cannot repay your debt in full, you could agree on a payment arrangement with the CRA. Although it will not reduce your overall tax debt, you can spread your payments out over time until it is paid in full

Should I get a loan to pay off my tax debt?

The CRA will typically advise you to cut back on your spending, or to borrow additional funds to repay your tax debt. As the CRA charges you 5% on late payments and in some cases penalties too, it could work out to be cheaper to take out a loan to repay your tax debt. Taking out a loan when you are already in tax debt can, however, be a slippery slope so you need to be careful in doing so. For this reason, it is very important to consider the interest rate of any loan. If you are really struggling, you may be eligible to apply for taxpayer relief. This is open to Canadians who cannot make their tax debt payments because of circumstances like a serious illness or job loss. Consult a Licensed Insolvency Trustee to discuss if you are concerned about your financial situation.

Help with CRA debt – what are the best solutions for tax debt?

Contrary to popular belief, there is no such thing as CRA debt forgiveness. If you are struggling with repayments for your tax debt and a payment arrangement with the CRA will not work for you, thankfully there are a number of debt relief options out there. Your first port of call should be to book a free consultation with a Licensed Insolvency Trustee. They are the only professionals legally able to file all forms of debt relief in Canada, so are a great source of advice and recommendation. At Spergel, we have been helping Canadians to gain tax debt relief for over thirty years. As well as providing help with CRA debt by reducing or clearing your tax debt, we can also stop collection calls and protect you from creditors. You should communicate with the CRA as soon as you can to inform them that you are working on a repayment plan or a form of debt relief. The sooner you act, the sooner you can stop your interest charges and penalties from adding up and making your debt more expensive. Our trustees will work with you to assess your circumstances and advise you on the best form of debt relief for your financial situation. Here are the most common ways we tackle tax debt:

Filing a consumer proposal

A consumer proposal is a legal form of debt relief that is essentially a debt settlement with your creditors. After reviewing your financial situation and the amount of debt you owe, one of our reputable Licensed Insolvency Trustees will work with you to propose a monthly repayment to your creditors. This will be an amount you can reasonably afford, and one your creditors will likely accept too. As creditors would rather receive more money via a consumer proposal than they would from a bankruptcy, they are likely to accept. At Spergel, we have a 99% acceptance rate on all the consumer proposals we file. Advantages of filing a consumer proposal include reducing your debt by up to 80%, allowing you to keep your assets, and offering protection from your creditors including the CRA. Our trustees will negotiate with the CRA on your behalf.

Filing bankruptcy

For instances where you may have very little in the way of non-exempt assets and require full clearance of your unsecured debt including tax debts, bankruptcy may be the best option for you. Bankruptcy is the process of assigning any non-exempt assets you may have over to a Licensed Insolvency Trustee in exchange for clearance of your unsecured debt, including tax debt. The advantages of filing bankruptcy include clearing your debt and protection from creditors, collection calls, and wage garnishment. It can offer you a fresh financial start from tax debt – learn more about life after bankruptcy.

CRA tax debt relief

In some instances, you may even qualify for relief from CRA penalties and interest charges which can reduce the overall amount that you owe. Criteria to meet for this includes a severe medical condition, financial hardship, or even a natural disaster that has led to your tax problem. In this scenario, you may be able to apply via a CRA Taxpayer Relief Application. Although this relief will not waive any of your principal tax debt, it could cancel some or all of the interest and penalties on your tax debt. Ask the CRA or your Licensed Insolvency Trustee if you may be eligible for this relief. You will need to provide evidence of your circumstances, and applications are approved on a case by case scenario. Your chances of having your application approved are increased if you work with a reputable Licensed Insolvency Trustee who understands the ins and outs of tax debt. At Spergel, we have years of experience in preparing these applications on behalf of our clients.

When you are struggling with a large tax debt, it can be difficult to see a way through it, particularly when interest charges and penalties continue to add up. At Spergel, we have over thirty years’ experience of working with the CRA and providing Canadians help with CRA debt. Book a free consultation with one of our Licensed Insolvency Trustees to review your tax situation and we will recommend the best course of action for you.


Colin Boulton

Colin Boulton is a Chartered Accountant and Insolvency and Restructuring Professional with over 20 years’ experience as an LIT (Licensed Insolvency Trustee). He is also our resident expert on unemployment and wage garnishments and manages Spergel's offices in Eastern Ontario (including Oshawa, Peterborough, Lindsay, Ajax and Scarborough). When not at the office helping clients cross their debt-free finish lines, Colin enjoys training for and participating in triathlons.

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