Tax Debt Help – What You Need to Know

Posted on 12 June 2019

Understanding your options for tax debt help.

A big tax bill is never welcome when it arrives. Especially if the debt is the unexpected result of a mistake in filing, which can happen. Unfortunately, tax debt gets worse if you can’t pay it back right away. It’s important to get ahead of it before you begin to owe interest and penalties. Before your tax debt gets too bad, it’s a good idea to explore all of your options for debt relief. Whether you filed late taxes, or made a mistake that had your bill re-assessed unexpectedly, you need a plan to deal with your tax debt. So where do you start?

Interest and Canada Revenue Agency (CRA)

First, you should understand how much unpaid tax debt can cost you. For any mistake in filing, CRA will typically charge penalties and interest. Likewise, if you “carry a balance” for awhile, your tax account will be billed interest and possibly penalty fees. How much do they charge? CRA penalties begin at 5% for unpaid taxes but can go up to 50%. Interest will be billed monthly until your balance is paid in full. Over time, a tax debt left unpaid can grow to an uncontrollable amount. Thankfully, there are options for tax debt help, starting with the options CRA offers directly to taxpayers.

Applying for Taxpayer Relief (RC4288)

Canada Revenue Agency offers the opportunity to apply for relief under the Income Tax Act. The RC4288 “request for taxpayer relief  to Cancel or Waive Penalties or Interest” is option number one. Depending on your situation, you may be able to reduce your interest and/or penalties through this application process. However, it is important to note that this program is intended for taxpayers experiencing financial hardship or “extraordinary circumstances”. For example, if you are unable to afford food, shelter, medical treatment, have experienced a serious accident or natural disaster, your application may have a greater chance of success. You can also apply for relief if your penalties and interest were the result of errors or delays created by CRA. One of the benefits of this program is that you can go back and apply for relief for the past 10 years if you need to.

Alternatives to Taxpayer Relief

Taxpayer Relief or Consumer Proposal?

So – should you apply for taxpayer relief or is there something else that you can do? The approval process for submitting an RC4288 form can take awhile. While you wait, interest will be charged and if your application is denied you’ll owe more. Your past history with CRA will be a factor so if you’ve got a history of filing late or past mistakes on filing returns, it could impact your application.

If your tax debt is still manageable, there is another option. You may want to consider an alternative to bankruptcy called a consumer proposal. A consumer proposal allows you to make a deal with your creditors. You can bargain with CRA and reduce the tax debt that you owe. One of the greatest benefits of this debt solution is that your interest will stop and very possibly be reduced by the proposal itself. You can reduce your tax debt by up to 75% and include other troubling debts too.

Consumer Proposal or Bankruptcy?

Speaking of bankruptcy, this solution can also help with your tax debt problem if a proposal is not the best option. Bankruptcy is usually the last solution for many people. However, if your tax debt is very high and your income is low, a consumer proposal may be too expensive. Bankruptcy relief may be the debt solution that makes the most sense, even if it’s the least desirable option. To be in a better position to consider a proposal and avoid bankruptcy, it is important to act on your tax debt early. Your proposal will be less expensive if interest and penalties have not inflated your debt. Tax debt can grow to an amount you can’t afford to repay – even at a reduced consumer proposal rate. An expert in bankruptcy can review your tax debt and compare proposal and bankruptcy options before you make the decision to file. If you’ve recently received a tax bill and filing bankruptcy is something that worries you, take these steps and get help now. Don’t give your outstanding balance time to grow.

Spergel Tax Debt Help – You Owe It to Yourself

We want to help you deal with your tax debt with a quick and appropriate solution. We understand that your tax debt needs to be addressed right away and that you need a solution you can afford to live with. Don’t let your tax debt get out of control, get the tax debt help you need today.

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Helpful starting information:

What to Bring to an Appointment

To get the debt help that you need, please bring a list of who you owe and how much to each, a list of everything you own and your monthly household budget. Don’t have everything right away? Don’t worry – We will guide you through each step.

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Your Information

We’ll walk you through our application process. But, if you want to prepare for your debt free assessment consultation in advance, download our information form and fill in what you can.

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How can you compare your debt repayment options if you don’t know how much they will cost you? Your solution will become much clearer when you are able to compare costs.

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If you’re ready to be debt free, it’s time to meet with one of our knowledgeable Licensed Insolvency Trustees at your convenience and get started

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