With tax deadline just around the corner, you may be starting to feel your anxiety levels rising at the thought of doing your taxes to prepare for tax filing. Owing money to Canada Revenue Agency (CRA) can be a heavy burden to bear, especially if you don’t know your options.
We’re going to lay it all out for you below, so you understand the CRA, your income tax and how you can pay back your government debt.
Why is it important to file my taxes?
There’s no reason why you shouldn’t file your taxes. It’s easier to file them than not to and there are lots of convenient user-friendly tax return software options to help you through the process. It’s important to file your tax returns to take advantage of refundable tax credits (such as child tax credits), create contribution room in your RRSP or TFSA, carry forward or transfer any unused tuition, education or textbook amounts, and reclaim any tax you overpaid from your pay cheque. Filing your taxes early or on time will give you the opportunity to have extra time to make an income tax payment to pay back your taxes, receive a faster tax refund, protect yourself from identity theft and avoid late penalties and interest compounded daily.
When is the deadline to file taxes in Canada?
The deadline to file taxes in Canada is April 30th. Tax preparation can be a time consuming process and it is important to start organizing your information early so you can submit your tax filing on time.
What is the CRA and what can they do?
The CRA administers tax laws for the Government of Canada and oversees various social and economic benefit and incentive programs delivered through the tax system. For those who don’t pay their taxes, the CRA has the power to take collection measures for debt repayment legally through the Canadian Income Tax Act, without needing to go through the court system. The most common first step the CRA will take is to contact you through mail/phone, giving you the opportunity to call them to discuss debt management and debt repayment options. It’s important to not ignore your creditors! Failure to contact the CRA after receiving their letters or calls can result in wage garnishments of your pay cheque or salary, or freezing of your bank account by the CRA. As a last resort, the CRA can administer the statutory CRA tax lien, which is essentially registering a lien against your house.
How can I manage my creditor payments, including my income tax debt?
Before you can understand your financial situation, you need to know what you owe. So while it may seem overwhelming, it’s important for you to complete and submit all your outstanding tax returns. Take a look at all your past tax returns to ensure you’re taking advantage of all the possibilities to reduce your taxes.
Know your options. If you couldn’t pay your tax debt in the past due to events beyond your control ― like a job loss, natural disaster or serious illness ― you may qualify for tax relief provisions to have penalties or interest cancelled or waived. You can also attempt to negotiate your repayment terms by contacting the CRA. While this is a great option, it’s important to note that you will still be required to pay off all your tax debts and you only get a limited time to pay it back.
What if I can’t afford to repay my income tax debt?
If your debt is too high for you to pay back within the CRA’s timelines, you still have options.
The Orderly Payment of Debts (OPD) program is an established debt consolidation repayment program exclusively offered and managed by Money Mentors on behalf of the Government of Alberta. If your taxes are up-to-date, all tax returns have been filed and you owe money to the CRA, you may be a candidate for the OPD program. With no startup fees and a guaranteed 5% interest rate, this is a great option for you to pay off all your unsecured debts, including income tax debt, over 5 years or less. During your appointment with a Money Mentors counsellor, we can also discuss other legislated options if appropriate. Bear in mind that the OPD program consolidates all your debts, including income tax debt.
If I need help with my debt, including government debt, who can I talk to?
Money Mentors has helped many Albertans manage their government debt. Our approachable, experienced credit counsellors will explore all debt relief options with you and provide unbiased information, so you can confidently tackle your debt the best way possible. To book an appointment, please call 1-888-294-0076 or send an email to email@example.com.
Source: Money Mentors