Can I Settle my Income Tax Owing to Canada Revenue Agency (CRA)?

If you mean ‘on your own’, you are certainly welcome to try. But CRA has wide powers of collection and many ways to force your hand in order to get you to pay.

They can garnish your wages (enter graphics), lien your house and freeze your accounts, all without even having to get a court order to do so. They can even withhold certain payments like Canada pension to offset the tax owing. Therefore, they may be unwilling to bother making a deal with you privately as they are likely to force you to pay eventually.

If you have significant taxes owing and are unable to realistically pay CRA any time soon, or if you’re already having wages garnished, you can speak to a licensed Trustee. A trustee is a debt expert, licensed by the federal government with powers that supercede CRA’s collection efforts. A trustee can force CRA to lift garnishees and unfreeze accounts when you file a bankruptcy or what’s called a consumer proposal. But the trustee also makes sure you can afford the proposal and that you pay it in full over time.

A proposal is a legal settlement you make with all of your unsecured creditors, including CRA. You can include tax debt in a proposal or bankruptcy. The trustee does all the work and negotiations based on what you are able to afford. CRA cannot take any action to enforce, or if they already have, they must stop.

A proposal allows a person breathing room. It stops all interest and penalties, which in the case of tax debt can be very punishing. CRA will also almost always write off a significant portion of the principle owed. You may end up paying only cents on the dollar, all principal. The monthly payments are set up according to your income & budget. And you get a full court release from all your unsecured debts once you have successfully paid the proposal. You don’t even have to give up your house, car, investments or other assets.

Many types of tax owing can be included in a proposal: personal income tax, HST or PST owing by a director from a corporation, directors’ liability such as source deductions. A trustee will also advise you on your rights with respect to continuing your business operations if that is your intention.

There is no other way to get CRA to make a deal with you other than to negotiate with them yourself or through an expensive tax lawyer.

So consider filing a consumer proposal with a licensed trustee to eliminate your income tax debt. Call for a free consultation and start getting your life back on track.