The Canadian government has launched a number of relief measures to assist Canadians during the COVID-19 crisis. These included the provision of additional benefits, temporary suspension of debt collection activities, and extension of tax filing deadlines.
The Canada Revenue Agency (CRA) also confirmed that individuals who file their 2019 individual income tax returns before September 1, 2020, will not face any late-filing penalties. It was also announced that if the 2019 tax return was not assessed in time, benefits payments for July to September 2020 would be based on the information from 2018 tax returns.
Additionally, collections activities on new debts were also temporarily suspended until further notice.
What does this mean for the future?
While the deadline relaxations sound great, they are only buying you time.
A deferral does not mean that the debt has been cancelled. In fact, the flexibility that the CRA is offering at this time is likely to lead to more aggressive collection action once the economic situation improves and collections activities resume.
So, if you anticipate that you will face issues in managing your CRA tax debt, it is recommended to plan ahead and be prepared for when the CRA resumes collection action.
What actions can be taken by the CRA?
When the CRA Collections Department contacts you for payment of an outstanding debt, it can be a difficult situation to deal with. Unlike any other creditors, the CRA usually takes a tough approach and it is more difficult to negotiate the terms of a payment plan with the agency.
Sometimes they can seem reasonable simply to get you to share critical information like where you bank, where you work, and what assets you have. They ask you to complete a financial disclosure form under the guise that they will negotiate with you but often ask for payments which you can’t afford to make. Then they use the information you provided to freeze your bank accounts, garnish your wages, or place a lien on your home – without providing you any warning.
Though, if you’re unable to repay your debt, you can work with the CRA to agree on a payment arrangement where you pay the debt off in installments. We don’t ever recommend trying to negotiate with the CRA directly. Always approach them represented, to avoid weakening your case and ensure that you’re able to negotiate properly.
What should you do if you have a CRA debt you can’t pay?
When it comes to personal debt management, especially when dealing with the CRA, it is always good to have a proactive rather than a reactive approach.
The temporary debt relief granted to individuals and businesses is about to come to an end.
Financial consultants, like DebtCare Canada, can help you analyze all of your options, discuss various strategies for repayment, and bring together the resources you need to resolve your debt issues. This can include cleaning up other debts to free up money for your tax payment, accessing home equity to pay what you owe the CRA, or taking advantage of federal government programs to prevent enforcement action and enabling you to pay a monthly payment you can live with.
DebtCare also provides access to one of the only programs that can resolve a CRA back tax problem. In this program:
- Your principal tax debt can often be reduced.
- Interest and penalties immediately stop.
- You are able to make a single monthly payment.
At DebtCare Canada, we offer a free consultation and debt counselling to deal with tax and collections problems. Contact us by calling or texting 1-888-890-0888 or visit www.debtcare.ca to learn more.