Tag: freezing your bank account

Many, many Canadians struggle with income tax debt in Canada. Income tax debt in Canada can occur for many reasons, many of which were not intentional on the part of the taxpayer. Sometimes a taxpayer earns more than he or she expects, not realizing the tax implication. Other times taxpayers unwittingly declare expenses they are not entitled to. Once a tax return is filed later or re-assessed resulting in an amount owing, the Canada Revenue Agency will add penalties and interest retroactive on this tax debt causing it to double and even triple in size.

When a large income tax debt is owed to the Canada Revenue Agency it can be paralyzing. The Canada Revenue Agency will demand to be paid in full and has incredible authority and resources to collect the income tax debt from you. This can include freezing your bank account, placing a lien on your home or other assets, garnishing your wages and even criminal prosecution. Many people feel so overwhelmed when they have a tax debt that they simply ignore it because facing it is too stressful; but this is the worst thing to do because the Canada Revenue Agency will catch up eventually and the consequences will be catastrophic.

So what can a Canadian who has income tax debt in Canada do? The first thing is to realize that you have to deal with it and be pro-active instead of reactive. Waiting until the Canada Revenue Agency has taken collection action against you before dealing with the income tax debt will only result in major financial consequences that could disrupt your overall quality of life. When the Canada Revenue Agency does not have an enforcement measure in place you have more leverage because you are voluntarily dealing with the problem.

If you are behind in filing returns, get them filed. It is not illegal to owe money to the Canada Revenue Agency; failing to file is illegal and is tax evasion under the Income Tax Act. Yes, once you file your late returns you will owe penalties and interest but before you can truly deal with your income tax debt you must know how much you owe.

If you know that you have failed to declare income on a past tax return or written off expenses that you know you were not entitled to, consider filing a Voluntary Disclosure Application with the Canada Revenue Agency so that you can become tax compliant. Again, it is not illegal to owe money to the Canada Revenue Agency, but it is illegal to fail to disclose income and write off expenses that you were not entitled to.

If you do not have the liquidity to pay off your tax debt, get financial help. Work with a debt consultant to weigh your financial options. Income tax debt is like any other debt. There are Federal Government Programs in place to provide Canadians with a legal avenue to deal with their debt. These avenues in many cases do not involve bankruptcy and can stop Canada Revenue Agency collection action.

Do not do fancy footwork, transferring assets into the names of loved ones or attempt to hide your money. These efforts will be fruitless. Not only can you risk tangling your loved one up into your problem but you will also live a life fraught with worry wondering if tomorrow will be the day that the Canada Revenue Agency catches up with you.

Remember, you are not the first Canadian who has a tax problem and you will not be the last. There are solutions and all you have to do is take the first step towards them.

For more information about dealing with debt or to get help with income tax debt in Canada please visit www.debtcare.ca or call 416-907-2582.