Dealing with Outstanding Tax Debts to the Canada Revenue Agency 

If you’re burdened with tax debts to the Canada Revenue Agency (CRA), you’re not alone. Many Canadians find themselves in a similar situation, but there are ways to address this issue. 

Understanding Your Tax Debt Situation with CRA 

Before diving into solutions, it’s essential to understand three critical aspects of your tax debt: 

• The total amount you owe. 
• Your financial capacity to repay the debt. 
• Your past interactions and dealings with the CRA. 

Being aware of these factors will place you in a stronger position when discussing potential solutions with the CRA. 

Possible Solutions to Address Your Tax Debt 

• Negotiating Payment Terms with CRA: One approach is to negotiate a payment plan with the CRA. They might allow you to spread your payments over a specific duration, like a year. However, this method has its drawbacks. You won’t be able to reduce the amount you owe, and your debt will continue to accumulate interest and other penalties until it’s fully paid. 

• Filing a Consumer Proposal: Another alternative is to file a consumer proposal with a licensed trustee under the Bankruptcy and Insolvency Act (BIA). This allows you to negotiate a settlement for your tax debts without declaring bankruptcy. The benefits of this method include: 
• The possibility of the CRA accepting a reduced payment. 
• Halting additional interest and penalties from the day the proposal is filed. 

• Bankruptcy: If the above solutions aren’t feasible for your situation, the last resort might be to declare bankruptcy. By doing so, all your debts related to income tax and GST are legally cleared. 

A Final Thought 

When aiming to clear your tax debt with the CRA, always be aware of the amount you owe, your repayment capacity, and your past relationship with the CRA. If you have undisclosed income and wish to avoid added penalties, it’s worth exploring the voluntary disclosure program for Canadian taxpayers.