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Will the CRA Settle My Tax Arrears for Less Than the Full Amount Owed?

November 02, 2022

By: Mike Vorona, Junior Associate, Collections, Farber Solutions

One of the most frequently asked questions by our clients is if the CRA (Canada Revenue Agency) will accept less than what is owed in arrears.

The simple answer is no. Outside a formal insolvency (i.e. Consumer Proposal or Bankruptcy), the CRA does not have the legal authority to arbitrarily lower the amount of your debt. When it comes to collections, the CRA operates under a narrow set of policies and procedures aimed at collecting debts with the only flexibility being in payment arrangements that are dictated by your ability to pay. Any attempt to negotiate a lower amount will not be given consideration.

Can the CRA do anything to save me money?

The good news is that the CRA can reduce interest and penalties through the Taxpayer Relief Program, a separate division from Collections, which grants relief to those taxpayers who qualify.

Generally, to be considered for the program you must be eligible under guidelines that state relief will be granted to taxpayers who experienced one or more of the situations below:

  1. Extraordinary circumstances: These are events beyond a taxpayer’s control that prevented the person from making payments or filing a return on time. This could include natural or human-made disasters (i.e., floods or fires), disruption in services (i.e., postal strike), serious illness or accidents, or serious emotional or mental distress.
  2. Actions from the CRA: Relief may be granted if interest or penalties resulted from the actions of the CRA. Examples of this are errors in material available to the public, incorrect information provided to the taxpayer, errors in processing, or different delays (i.e., processing, providing info, resolving an objectionappeal, or audit).
  3. Inability to pay or financial hardship: If you are experiencing financial hardship, you have to prove that the tax debt has added up to a point where it is impossible to pay off the debt and still be able to provide basic necessities for yourself. There also may be a situation in which interest and penalties would prevent a business from operating by negatively affecting cashflows, and causing major layoffs that impact the community. When that happens, relief from penalties and interest could be considered.

If you believe any of these circumstances apply to you, Taxpayer Relief might be an option for reducing your tax debts.

Our ex-CRA professionals with Farber Tax Solutions have first-hand experience with tax issues such as these to ensure your rights are fully protected and you get the best possible outcome. Contact us today for a free, no-obligation consultation to find out how we can help you.