# Big Income Tax Debt



## spirodonfl (Jun 17, 2013)

Hello,

So I have a big problem. I've accumulated at least 53k in income tax debt, if not more with penalties and fees if they decide to slap those on, not include the 2012 tax year. What happened?

I was young, stupid and ignorant and did not file my taxes for many years. Since 2005. The last few years, I've been trying to get everything in order to take care of this and deal with it so I hired an accountant who's been helping me and we're now almost ready to file. He believe he can file in such a way as to reduce the chances of getting penalties and fees but, of course, there are no guarantees.

Meanwhile, CRA recently garnished an old employer of mine for GST / HST owing of up to 10k, which is an assessment that the CRA did. Hopefully filing my returns for the missing years will bring that down.

But now I'm concerned. I have a good job and I also run my own business which is doing very well. But there's so much differing information about how long the CRA will accept a payment plan for (must pay within 6 months - 2 years I've read, no consistency) and I've also read that they can use the information you provide them to pin you to the wall even if you verbally agree to a payment plan.

My credit is pretty bad so I'm not confident I can get a loan.

I'm unsure what to do. I want to face this and deal with it, even if it means working harder, and I'd rather avoid bankruptcy. A consumer proposal seems a good fit but I want to make sure that's right.

Help?


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## MoneyGal (Apr 24, 2009)

There are differing opinions on how long you have to pay back CRA because peoples' individual circumstances vary. 

If you are making genuine good-faith efforts to repay your debt with CRA through a payment schedule (using your cash flow), you will find them surprisingly easy to work with. If you have a successful business and a good job, a consumer proposal or proposal for bankruptcy will VERY likely not be accepted by CRA and/or the office of the superintendent of bankruptcy. 

Effectively you do already have a loan in place - it's with CRA.


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## Eclectic12 (Oct 20, 2010)

^^^^

I think it also depends on the overall picture as well. Proposing to pay back $10K per year while having a personal taxable income of $120K per year - probably isn't going to be accepted as a reasonable effort to pay the debt.

It's probably also a good idea to have clear any mitigating factors (ex. an income of $120K with support payments of $90K is probably going to allow for less to be paid back).


Cheers


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## fraser (May 15, 2010)

CRA Collections, as noted, are actually very good to work with and very flexible. The trick is to come up with a payment plan that you can follow thru on, ie no missed payments, and one that is reasonable.

If you can manage it, propose a small payment right now, along with regular payment schedule. Be prepared to to justify it. 

I have no doubt that CRA would much rather do it this way than chase you around. Good luck. 

If there is a CRA office where you live, it would be even better if you made an appointment with a Collections persons and went to see them in person.

Good luck.


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## sags (May 15, 2010)

Practically speaking, unless you have the ability to pay 4000 a month in payments to the CRA debt, you should talk to a bankruptcy trustee about a proposal.

The CRA are reasonable to work with, but your debt is very high for monthly payments, and it will keep growing from year to year.

The CRA has no latitude in reducing the income tax debt itself.........but they can waive penalties. They can also waive interest if the criteria for hardship is proven.

Simply not paying the taxes for years.........isn't going to go over well. The CRA has already garnished an old employer.......so they will be seizing your bank accounts, wages, and assets next.

I would deal with this..........ASAP.


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## NorthKC (Apr 1, 2013)

As an accountant, the one thing the CRA likes to see is that you're making payments "in good faith" before you call them with the payment plan. If they see that you are trying to pay it down, they're more likely to work with you.

Keep in mind, they will ask for a full breakdown of your income and expenses and occasionally, net worth (usually if you're making a ton of money), to determine the best monthly payment plan. With that said, the CRA would rather work with you so that they can get the money rather than wasting time running after you. Whatever you do, *DO NOT MISS A SINGLE PAYMENT* when you're on a payment plan with them. They have the right to void that agreement and go after you hard for the rest of the money to the point where they may garnish your paycheque. If you do have the opportunity to pay it in full anytime, go right ahead. 

Good luck!


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## kcowan (Jul 1, 2010)

Also it has been my experience that the GST collections people are separate from the income tax people. I was tardy on GST filings once and they levied an enormous estimate. I called them and said that I had been tardy because the net owing was small. We agreed to switch to annual filings in June to make it easier because that was when my business filings were. Then I focused on doing all the arrears and ended up paying a small amount to clear it up.

So don't wait until all the income tax filings are done.


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