CRA Debt Forgiveness
An increasing number of people in Canada are finding themselves with tax debt. Even if you file your taxes every year, it is still possible to end up owing the Canada Revenue Agency (CRA). There are many reasons a person may find themselves owing substantial tax debt. Typically, an employer will deduct taxes from your earnings. This usually ensures that you do not become liable for additional taxes on your income. Where a lot of people run into problems is with alternative sources of income. This could include any secondary business, multiple pensions, and business owners. In the majority of cases, persons who work for themselves or have secondary sources of income are at a higher risk. If you are facing tax debt, choosing the right licensed professional could save you hundreds of thousands of dollars. Are you wondering if you should seek advice from an accountant, tax lawyer, or licensed trustee? We have answers.
In today’s article, we explain the best and most affordable options for resolving tax debt. In the right circumstance, a person may be able to negotiate directly with the CRA to repay their tax debt in full, plus interest, during a one year period. This only works for individuals with relatively simple tax debts and the financial ability to repay what they owe in a single year. For most tax debts, more expertise is required. So many people with tax debt spend thousands of dollars out of pocket on tax lawyers and accountants only to find themselves in more debt. At Hudson & Company, we want you to be able to make an informed decision about your finances.
What are my best options?
So you owe Canada Revenue Agency a significant amount of money in tax debts. First of all, you are not alone. At least half of the people are looking for help with money owed to the government. What are your best options? As Licensed Insolvency Trustees, we specialize in debt resolution. When it comes to tax debt, the only option for repaying less than you owe is through filing a consumer proposal. This is often the most affordable alternative to bankruptcy. But, depending on your circumstances, it may be better to get a completely fresh start by declaring bankruptcy. A trustee will evaluate your situation to find the best debt solution for you. If you owe the government more than you are able to repay, there are two guaranteed types of debt resolution that are acceptable to the CRA:
- Filing a consumer proposal – if you are financially unable to repay your tax debt, a consumer proposal is the only form of debt resolution that the CRA accepts. A proposal involving the CRA includes all taxes owing until the previous year and any other outstanding insolvencies you may have. Note that taxes owing for the current year must be handled differently and a LIT will advise you accordingly. For a standard CRA proposal, a licensed trustee will work one-on-one with you to put together a proposal you can afford. Once filed, there is a vote amongst creditors. If you owe the most substantial amount of money to the CRA, they will have the deciding vote. If other creditors hold more than 50% of the total amount you owe, they hold the majority ruling. A significant advantage to a consumer proposal is that it is legally binding on ALL creditors, including the Canada Revenue Agency.
- Declaring bankruptcy – if you cannot afford to repay the CRA and you do not qualify for a consumer proposal, the next option is bankruptcy. This action ensures that your debts are resolved quickly and gives you the opportunity for a fresh start. Any legal action against you will stop immediately, and you will begin the process of repayment by turning over your assets.
Canada Revenue Agency holds stringent policies around debt forgiveness. They require full disclosure of assets administered by a Licensed Insolvency Trustee through a consumer proposal. No other methods of debt resolution are accepted by the CRA. Informal debt settlements or repayment plans through counselling agencies will NOT be accepted by the Canada Revenue Agency. A legally binding consumer proposal can only be administered by a Licensed Trustee. At Hudson & Company, we know that most of our clients are struggling financially. Your initial consultation with a licensed trustee is always free of charge. We are here for you to answer all your questions and help you achieve your goal of debt freedom.