Dealing With Tax DebtsA Guide to Debt

Settlement with Canada Revenue Agency

www.hoyes.com

Table of Contents

Common Reasons For Tax Debts

CRA Collection Powers

Verify What You Owe

Review Your Options

Next Steps

3

5

6

13

2

4

• Unpaid taxes on self-employment earnings.• RRSP withdrawals without adequate

withholdings.

3

Common Reasons for Tax Debts

• Working two or more jobs without increased source deductions for higher income.

• Pension income higher than source deductions.

• Directors obligations for unpaid corporate source deductions or HST,

CRA Collection Powers

4

• Wage garnishment• Seize bank accounts and

investments• Register lien on home or

other property• Withhold child tax credits,

HST credits, income tax refunds

Canada Revenue Agency has strong powers to ensure payment of back taxes including:

Verify what you owe

5

The first step is to file all outstanding tax returns so you know how much you owe.

Canada Revenue Agency will not work with you until all your tax returns are filed.

6

Review Your Options

CRA will not generally accept less than full payment except through a proposal or

bankruptcy.

1. Work Out a Repayment Plan

2. Apply for CRA Fairness3. File a Consumer Proposal4. File Personal Bankruptcy

7

Your Options

Contact your nearest CRA office to negotiate terms to repay your debt over a period of time however you will:

Work Out A Repayment Plan

• Be required to pay 100% of your debts• Be charged penalties & interest until your

tax debts are paid• Generally be asked to repay your back

taxes within one year

8

Your Options

Request For Fairness Relief form

CRA Fairness Program

• Extraordinary circumstances such as illness, accident, disasters

• Inability to pay due to financial hardship• Errors and processing delays on the part of

CRA

Canada Revenue may grant relief from penalties and interest for the following:

9

Your OptionsConsumer Proposal

• Repay less than the full amount owing• A proposal freezes interest and penalties• CRA actions including garnishments stop

A Consumer Proposal is the only debt settlement option CRA will accept.

File a Consumer Proposal with a bankruptcy trustee

10

Your OptionsConsumer Proposal

• All tax returns must be filed first• All returns due during the proposal must

be filed when due• Taxes owing during the proposal must be

kept current• Refunds for periods prior to filing will be

applied to your tax debt

What else you need to know:

11

Your OptionsBankruptcy

• Wage garnishments and bank account seizures will stop;

• Income tax, HST/GST, penalties & interest are all discharged by filing bankruptcy

Tax liabilities are debts included in a bankruptcy

12

Your OptionsBankruptcy

• Liens against your home or other property registered before you filed bankruptcy may not be removed

• Personal income tax debts over $200,000, where they are 75% or more of your debts, will result in additional duties and you will not be eligible for an automatic discharge

What else you need to know:

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Your Next Steps

• File outstanding returns• Total how much you owe• Determine if you can afford

to repay• If not, contact a federally

licensed bankruptcy trustee

There is hope. You can be debt

free. View our Guide to

Dealing With Tax Debt

Or give us a call at 310-PLAN