Second Step: Be Aware of the Consequences of Unpaid Income Taxes and Late Filed Returns

There are two certainties in life, death and taxes.  Neither situation is something that one looks forward to and the CRA has extensive powers to enforce the filing of returns and the payment of taxes.

○ Penalties and interest are charged on balances due on late filed tax returns.  You should consult with your income tax preparer as to your due dates.

○ In the event that returns are not filed, the CRA can make an arbitrary assessment for your income tax liability.

○ The CRA can withhold child tax credits, Canada Pension Plan or Old Age Security benefits, GST credits and tax refunds until your debt is paid.

○ The CRA can garnishee your bank account and paycheque directly from your employer.  No court application is required and as such, your bank or employer need only be served with a “Requirement to Pay” notice by the CRA.

The CRA will typically not accept less than full payment from a taxpayer unless you engage the services of a Licensed Insolvency Trustee or are successful with a Taxpayer Relief application.  From the CRA perspective, should they accept less than the full balance outstanding, they would be setting a precedent that would force them to accept lower amounts from all other taxpayers.  As such, the obligation can only be reduced through a Licensed Insolvency Trustee or through the Taxpayer Relief provisions.

※ Third Step:  Consider Possible Tax Debt Solutions

Understand the choices you have when dealing with income tax debts in Canada and choose the best solution for you.  A full explanation of these options can be found on the “Tax Debt Solutions” page on this website.