November 21, 2022
By: Scott Hannay, Associate, Collections, Farber Tax Solutions
If you owe money to the Canada Revenue Agency (CRA) and you can’t pay the full amount all at once, the CRA will ask that you pay it within six months, usually without asking for any other financial information from you.
What if I can’t pay off my tax debt in six months?
If you need more time to pay off your tax debt, the CRA will ask for an Income and Expense statement that lists your household income, expenses, your assets, and liabilities. They will also generally ask for three to six months of bank statements to compare and confirm the numbers you’ve stated on the form.
You will be asked to take out a loan in order to make the six-month payment date. If your loan application is rejected, you’ll need to provide the CRA with a letter of loan denial from your financial/lending institution as proof.
Depending on your arrangement, the CRA usually conducts regular reviews at every following six-month mark. They may ask for an update on all the information you have previously submitted.
What if I can’t make the payments I agreed to?
So, you have negotiated a CRA payment plan and your situation has changed. It happens. Maybe you or your partner is suddenly unemployed or developed an illness that prevents you from meeting your CRA obligations.
Whatever the reason, if you find that you can’t keep up with the negotiated payment arrangement you should contact the CRA immediately. Keeping the lines of communication open is key. If you don’t contact the CRA with an update on your circumstances, legal action could be taken without notice as a result of not paying what you had agreed to.
The good news is that you can renegotiate your payment arrangement. This is because the CRA bases these arrangements on your demonstrated ability to pay. After you’ve communicated your new financial situation, you should also submit an updated Income and Expense statement, bank statements, and whatever proof you may have surrounding your new circumstances.
Dealing with the CRA can be highly stressful and not an easy proposition. At Farber Tax Solutions our ex-CRA advisors have decades of combined experience to navigate the policies and procedures ensuring your rights are fully protected and you get the best possible outcome.
Contact us today for a free, confidential consultation.