By Jasmin Brown

BDO Debt Solutions

Solutions for Income Tax Debt

Apr 16, 2021 | 10:39 AM

It is that time of year again – income tax time. Many people will find that they have income taxes to pay this year. Perhaps they also owe for income tax from previous years. People seem to experience the burden of owing income tax debt somewhat more profoundly than other types of debt. It can be extremely overwhelming knowing that you owe the government. Often times, people will avoid filing returns and facing the debt head on, as they fear the final numbers and the potential outcome. These feelings are valid. CRA has stronger collection tools than other ordinary creditors. The good news is that there are solutions available.

Options for Income Tax Debt

Owing taxes can be a challenge, especially since we know that many households in Saskatchewan are already living paycheque to paycheque. It can be especially difficult for self-employed people that are trying to pay income tax arrears and also stay current on future tax obligations. One thing is for sure though – ignoring your income tax debt is not a good solution. Here are some better solutions:

· Contacting Canada Revenue Agency regarding a repayment plan – they typically will not compromise on the total amount owing, but they may work with you on a plan;

· Looking into whether you qualify for Taxpayer Relief – under certain extreme circumstances that were beyond your control, the government may agree to waive your penalties and interest;

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· Reaching out to a Licensed Insolvency Trustee – they will explore options with you, including filing a bankruptcy or proposal. LITs are often successful in negotiating with Canada Revenue Agency on your behalf, and it often results in paying less than the full balance due.

Protection from Collection Actions

Filing a bankruptcy or a proposal initiates a stay of proceedings that prevents your creditors from commencing or continuing any legal action against you in pursuit of debt repayment. These proceedings will also stop wage garnishments, freezing of bank accounts and will prevent creditors from placing liens on your property. Filing a bankruptcy or proposal is meant to provide you with immediate financial relief to allow you some space to deal with your debt.

That being said, the sooner you deal with income tax arrears, the better. If the CRA places a lien (or federal writ) against your property before you file a bankruptcy or proposal, that debt will become secured to your property. It will remain on your property despite filing a bankruptcy or proposal. You would want to get a debt solution in place before they take that step.

I am often surprised to hear that people do not realize that income tax and other Canada Revenue Agency debt can be included in bankruptcy or proposal proceedings. Many people seem to have the idea that because it is CRA debt, there are no options available, which leaves many people feeling hopeless. The truth is, there are options available, and a LIT will walk you through those options and help find the solution that is best for you.

If you are having trouble making ends meet each month, finding the right debt solution can help. Visit the BDO Debt Solutions website for more information about bankruptcy, or call 1 855 BDO DEBT to book a free, no obligation consultation.

Prince Albert and Area