How to Make a CRA Payment Plan

Most people don’t set out to not pay their taxes. Disputes with CRA, financial problems, issues with businesses, etc. are all reasons why people end up with a tax debt that they have not and cannot pay in full immediately.  

If you have been contacted by the Canada Revenue Agency (CRA) regarding your tax debt, then you know that they always ask for payment in full. If they don’t have a lot of your information to take collection action against you, they may offer a temporary, short term payment plan in exchange for you completing a financial disclosure form. Once you step out onto that ledge, there is no turning back. Once CRA has the information they need to commence enforcement action, they will not leave you alone until the debt is paid or you end up bankrupt. Trying to negotiate a CRA payment plan directly is not just a bad idea - it can be dangerous.  CRA knows how to play “good cop, bad cop” and tax payers are often so surprised by how nice the CRA collector is (the taxpayer feels lucky!) caution is naively thrown to the wind and you fall into the trap.  Remember, the CRA collector’s job is to collect as fast as possible – he is your opponent and not your friend.

Maybe you think that you have nothing to hide and are serious about repaying your tax debt in installments so what harm could really come from showing CRA the state of your finances? Unfortunately that is not how it works. As far as CRA is concerned, the debt you owe to them should come before all others – personal loans, credit card payments, etc. Any surplus cash flow you have therefore should be included in your CRA payment plan – even if it means destroying your credit and putting you further in debt with your other creditors.  And how the CRA collector sees surplus cash flow will definitely not be fair to you. 

When you try to negotiate a CRA payment plan, what will CRA ask for? Full disclosure will include providing information about where you work, where you bank, what you own (including your home and any money you have saved for your children’s education) and all income sources, all payments, etc. This information is then used by CRA to develop a payment plan, which, if not followed, may lead to further enforcement action, including wage garnishments, property liens, frozen bank accounts, etc.

A voluntary CRA payment plan is possible.  However, these are not normal negotiations.  CRA collectors have very harsh collection tools and complex agendas to satisfy their managers.  If you really want a voluntary tax payment plan that is safe, one that CRA will accept and that you can live with, we do not recommend that you try and learn how to do this yourself.  The consequences of getting it wrong are severe and there can be no turning back.  Please speak with a professional experienced with negotiating binding CRA payment plans. This is a big buyer beware; your average tax accountant may not have the depth of experience in dealing with the enforcement arm of CRA and this can be tricky to navigate. Instead, opt for an organization that specializes in working with people who have tax problems, bringing to the table the expertise and know-how required to avoid further trouble.  

How will a tax professional help you navigate these waters? By correctly presenting CRA with the fair proposal that fits your budget and without giving CRA any further financial ammunition against you. A tax professional should also be able to discuss and evaluate your ability to qualify for various other programs that may help you get rid of your tax debt.

Often a CRA payment plan negotiated directly with CRA can become difficult, or even impossible, to pay, leaving you in severe financial trouble. Don’t fall into the trap of giving all of your information to CRA in the hopes that things will work out. Get the right help from an organization experienced with dealing with all different types of tax issues.

For more information about how to negotiate a CRA payment plan, please contact Tax Solutions Canada by calling 1-888-868-1400, or visit us at www.taxsolutionscanada.ca.

Does Tax Amnesty in Canada Really Exist?

When you file your taxes on time, accurately, every year, you likely don’t suffer from the stress that tax compliance issues can bring. However, if you are one of the many Canadians that fall behind filing or find expenses or donations disallowed resulting in large penalties and tax debt, that stress can become overwhelming. Even worse is the stress that can come with the knowledge that you have filed incorrectly, even if Canada Revenue Agency (CRA) hasn’t caught you yet - you worry every day that they will. The constant fear of a CRA notional assessment, re-assessment, audit or CRA enforcement action is frightening and sits in the back of your mind no matter how much you try to ignore it. If you have found yourself in this position, you might be thinking ‘does tax amnesty in Canada really exist,’ and if so, how can you access it?

Tax amnesty does exist in Canada. This does not mean however that if you fail to file returns year after year and then seek tax amnesty that you will necessarily qualify. Tax amnesty in Canada is covered by the Federal Government’s Voluntary Disclosure Program (VDP).

What is VDP? The Voluntary Disclosure Program exists to give taxpayers the chance to file late returns or correct any incorrect filings, incorrectly claimed expenses, unreported income, etc. voluntarily. By admitting the error and working to correct it, the government may grant some relief from interest and penalties.

There are 4 conditions that you MUST meet in order to qualify:

1.      The tax year in question must be at least 1 year old.

2.      The voluntary disclosure must involve a penalty. This means that if you know that you will not incur a penalty after late filing, there is no ground to file (since it is unnecessary).

3.      The disclosure must be voluntary. This means that you cannot have been contacted by CRA with respect to the tax year in question.

4.      The disclosure must be complete. You have to ensure that your application contains ALL of the information, tax slips, claims, etc.

If you know that you have made a mistake on a return in the past, or if you have failed to file and are constantly worrying about it, it might be time to consider making an application for tax amnesty before it is too late and CRA notionally assesses you.

Accessing the VDP has to be done correctly the first time – there are no second chances.  That is why it is always a smart choice to consult a tax professional and engage their services first. They can help steer you successfully through the VDP process, assess whether or not you qualify, and assist in filling out the application properly.   As we said above – there is no opportunity to redo the filing.  One strike and you are out!

For more information about tax amnesty through the Voluntary Disclosure Program, please contact Tax Solutions Canada today by calling 1-888-868-1400.