Hopefully you never run into a situation where you can’t pay the taxes you owe, whether it’s income taxes, sales taxes or other. However, things happen in life and sometimes you just can’t pay the bill in full. What should you do if you ever run into not being able to pay?
The first thing to do is not panic. Too many times people fall into a panic and think horrible things when they can’t pay. Worse, they don’t file because of the horrible balance they think they’ll owe. Even if you can’t pay all of your balance owing right away, you should still file your return by the deadline to avoid a late-filing penalty.
If you can’t pay the full amount of taxes you owe, you may be able to make a payment arrangement with Canada Revenue Agency (CRA). If they agree that you are unable to pay in full, an agent can work with you to develop a plan to help you pay your taxes.
If you cannot pay your balance owing on or before April 30, 2015, CRA will accept a payment arrangement only after you have reasonably tried to get the necessary funds by borrowing or rearranging your financial affairs. If the CRA agrees that you are unable to make a full payment, an agent can develop a plan with you to help you pay your taxes.
I have found that many times you can just send a letter with a payment arrangement and they will accept it; as long as it’s not taking forever to pay the bill. CRA usually likes the balance owing to be paid within 6 months though will accept 12 months.
If you do not deal promptly with your tax arrears, the CRA can take serious measures including legal action such as garnishing your income or your bank account or initiating other legal action such as seizing and selling your assets.
If you’re really in the weeds, check out The Voluntary Disclosures Program. This program allows taxpayers to come forward and correct inaccurate or incomplete information or to disclose information they have not reported during previous dealings with the CRA. Taxpayers may avoid being penalized or prosecuted and only pay the taxes or charges owing, plus interest, if they make a valid disclosure.
A few years back there was a care home in Kamloops; this was a place that looked after the elderly who couldn’t care for themselves. The owner admits that his bookkeeping was not up to snuff (doing it himself) and that he got behind. They tried to work with CRA on a payment plan; however, CRA demanded $20K up front before they would even make a deal. Sadly this was not possible and the care home had to close.
Once you get behind on your tax payments it can be hard to get back on track. However, talk with CRA and let them know your situation, they may just help you with a plan to pay it all back.
Things to Know Before Declaring Personal Bankruptcy
How to Repair Your Bad Credit Score
Does Being Denied Credit Hurt Your Credit Score?
How is Your Credit Score Determined?
Ways to Make the Most of your Pandemic Savings
Filed Your Tax Return? – What to do if you Forgot Something
The Personal Tax Filing Deadline is April 30th – Some Last Minute Reminders
Differences Between a Tax Credit and a Tax Deduction in Canada?