What Are Payment Arrangements?
If you owe money to the Canada Revenue Agency (CRA) and cannot afford to pay it in a lump sum, I can help you to negotiate a payment arrangement to allow you to make payment of the debt over an extended period.
The CRA are the most powerful collection agency in Canada and when you owe money to them, it can become a significant cause of stress and problems in your life. The Collection Policy of the CRA is to collect every tax debt immediately and in full. If you don't pay, the CRA have been given a variety of legal tools by Parliament to allow them to take your money unilaterally if you do not pay your debt, such as:
When the CRA use these collection methods, it can very quickly paralyse your life and will undoubtedly damage your credit rating. Although the CRA official policy is not to force taxpayers into bankruptcy, if your paycheques are taken away and your bank accounts frozen, the situation can rapidly get out of control and other creditors may start action against you to secure any other amounts you owe. If any of the above actions are being taken against you, speak to me to see if we can find a way to establish a payment arrangement with the CRA instead. As the most powerful collection agency in the Country, it is best to try not to owe any money to the CRA and if you do, talk to them about it and see what can be done to avoid them taking this type of action. Whatever route you choose to pursue, you should not just ignore the problem as they will not stop and it get worse the longer you leave it.
When will the CRA accept a Payment Arrangement?
If you need additional time to pay, the CRA have indicated they will accept payment arrangements "when you have exhausted all reasonable possibilities of obtaining the necessary funds by borrowing or re-arranging your financial affairs". In other words, you need to sell any assets you don't need and access your savings or try to get a loan before the CRA will consider granting an extended period to pay your debt. When you negotiate a payment arrangement, you have to provide full financial disclosure and information to the CRA to show that there is no other way to pay your debt and the CRA will ask for letters as proof that you have approached financial institutions for loans. Your tax debt is considered by the CRA to take priority over everything else in your life. Once they are sure you cannot pay in full, they will look at your monthly income and expenses to determine the maximum amount you could pay towards your debt above the basic income you need for food and shelter.
It is often difficult and stressful to try and negotiate such an arrangement as if the CRA do not like the figures and amounts you propose, they essentially tell you they will just collect from you using their legal powers and you will just have to deal with it. What this really means is if you don't propose something they like, they will force you into bankruptcy. On top of that, depending on how you provided your financial information, you may have unknowingly provided the CRA with a complete road map to find all of your assets and income so if they do refuse an arrangement, they know exactly where to go to collect from you. That being said, most CRA collection agents will accept a payment arrangement if it realistically uses all available resources to pay your debt in the quickest possible time. They are not completely heartless and will give you a chance to pay your debt. Typically, you will have more success if you can show that your proposed monthly payments will pay the debt within 6 to 24 months. I am happy to negotiate on behalf of taxpayers to reduce the stress of dealing with collection agents and have set many taxpayers up with long term plans to help them address their debts. This can be done as part of other services on an hourly fee and I also offer this as a fixed fee service for $875 plus HST. Once you have a payment arrangement in place, this can still be reviewed at any time and you can be asked to change the arrangement if your financial situation changes.
When might a Payment Arrangement not be helpful?
At the end of the day, the charge high interest on any debt (typically 4% above market rates) and so if you are able to get a loan or sell something you own to pay your debt, it is in your interests to do so as overall it will be cheaper than paying interest to the CRA. Where the debt is so high that repayment is not a realistic possibility, even over 2 years, taxpayers should consider speaking to experts such as credit counsellors or trustees to see if there is another way that this debt could be dealt with. Options such as Consumer Proposals or Bankruptcy should be considered if the taxpayer is insolvent and will not be able to pay their debts. You should also consider whether it is possible to make a Taxpayer Relief Application to cancel penalty and interest charges as a means to reduce the debt and assist with payment.