Tax season can be an exciting time to collect a refund cheque from the government, but for some people, it can be a challenging season of debt. The CRA can impose penalties and take legal action to ensure the debt is paid off as quickly as possible. CRA debt can be scary, but ignoring it will only make things worse. While debt forgiveness is not possible, there are several options you can explore to help you manage the situation. Here are a few ways to pay off CRA debt:
#1 Set up a Payment Arrangement
If you can not pay off your debt in a single payment, you can contact the CRA to set up a payment plan to make smaller regular payments towards your debt. The CRA typically gives 6- month payment plans without requiring personal financial information. To request a payment plan longer than 6 months, you will be required to provide financial information. You can use the CRA Payment Arrangement Calculator to estimate your payment plan.
#2 Apply for Taxpayer Relief
Under extraordinary circumstances and financial hardship, taxpayers with CRA debt can apply for taxpayer relief provisions. While this does not decrease the principal amount owing, it can waive penalties and interest charges. Applications are available through CRA My Account or by completing form RC4288.
# 3 Repay your Tax Debt using a Debt Consolidation Loan
In some cases, setting up a payment arrangement and applying for taxpayer relief may not be sufficient. Since the CRA considers debt owed to them to be a priority, you may consider a debt consolidation loan to stay caught up on your daily expenses to accommodate your CRA debt. Debt consolidation involves taking out a larger loan to pay off smaller debts such as tax debt. If you own your home, you can refinance your mortgage to pay off high-interest debt consolidation.
# 4 File for a Consumer Proposal or Personal Bankruptcy
With the help of a Licensed Insolvency Trustee, you can file a consumer proposal or personal bankruptcy to help with large CRA debt. A consumer proposal halts all interest, penalties and collection efforts on your debt. It can also help you consolidate all your debt into a single monthly payment. Filing personal bankruptcy means legally declaring an inability to pay off debt. Consumer proposals and personal bankruptcy programs should only be used as a last resort.
Whatever the case may be, our mortgage and lending experts at Source Mortgage Center are here to work with you to find the best solution for managing your debt. We understand that CRA debt can happen to anyone and we can help you get back on your feet! Reach out to us today!