The deadline to pay the Tax Man was April 30. For those of you who woke up on May 1, well-rested, knowing that you’ve filed your taxes on time, and have responsibly put that tax refund of yours into an RRSP or an emergency fund – kudos to you!
If this doesn’t sound like you – you’re not alone. We understand that this time of year can be daunting for a lot of people, for a number of different reasons. Perhaps you had every intention of filing your taxes on time, but life just got in the way. Or maybe you’re like many of the clients we see, and you’ve put off filing your taxes this year (and maybe last year, and the year before that…) because you’re too afraid to face what you owe the Canada Revenue Agency (CRA) when you finally do file your taxes.
If you’re self-employed this time can be particularly stressful for you, mainly because it’s very likely that you’ll owe money to the CRA. And while the CRA kindly gives you until June 17 to file your business taxes, beware that on April 30 they begin charging interest on taxes owed. When you’re self-employed, and have no T4 slip, it’s easy to sweep tax reporting under the rug. As an entrepreneur, you are especially susceptible to falling into the trap of using the money you should have been putting aside to pay your taxes for reinvestment into your businesses instead – do this year-after-year and it starts to snowball.
Whatever your situation, if you owe money to the CRA this problem won’t go away on its own. The CRA may not have contacted you yet, but they will. And, when they do, there’s a good chance that you will owe a big chunk of change – which, we might add, has interest that is compounding daily.
The CRA means business! Although no one wants to get a call from a creditor, you really don’t want to get a call from the CRA. Owing the CRA money comes with some serious consequences – here are some to name a few:
This is CRA’s way of getting your attention. Normally, they freeze the account and let it sit for a few days, waiting for you to contact them to see what the problem is. If you don’t contact them, they have the right to simply seize whatever funds you have in the bank. Your hard-earned cash is gone, and you could be left struggling to find a way to pay your rent, car insurance or even buy groceries.
The CRA can garnish up to 50% of your wages (that’s half your pay)! If you are self-employed and collecting receivables instead of wages, they may garnish 100% of your receivables. 100%! – and might we mention, this is perfectly legal.
Once a tax lien is registered on your property is works like a mortgage. It will remain on your property until it has been dealt with. It may interfere with renewing your regular mortgage, refinancing your home or selling your house. The worst part, you may not even know it is there until you try and do one of those things.
Ready for some good news? There is a way out if you find yourself owing money to the CRA. Our Licensed Insolvency Trustees at Smythe can work with you to develop a plan to file your taxes and deal with the debt on your terms, rather than let the CRA arbitrarily assess you and start their own collection actions.
One option our Licensed Insolvency Trustees can provide you with is filing for a consumer proposal. This allows you to settle your debts for less than what you owe. We’ll work with the CRA and your creditors to negotiate a settlement on your behalf and provide you with one, interest-free monthly payment that you can afford. If a payment plan or consumer proposal is not a feasible option for you, personal bankruptcy may be your best option. It’s also important to note that filing a consumer proposal or declaring bankruptcy is the only way to negotiate or eliminate debt that you owe to the CRA.
Ready for some more good news? After you file your consumer proposal or bankruptcy, you’ll be able to take a few deep breaths of relief and sleep soundly at night knowing that you’re protected under the Bankruptcy and Insolvency act, which means:
Though it may take the CRA a couple of years to catch up with you (if they haven’t already), once they do, the powers of the federal government can be quite terrifying. Take it from us, you don’t want to leave things so late that the CRA decides to deal with you, because it will be much worse than dealing with this yourself.
If you haven’t filed your tax returns because you’re afraid of how much money you already owe or the taxes you are going to owe when you do file, we strongly encourage you to reach out to our team of experienced Licensed Insolvency Trustees. We can help you come up with a plan that is best for you and your family and ensure you act before the CRA has the chance to.
Whether you have a quick question or are looking to book a free, no-obligation consultation, we encourage you to fill out the form below and Get in Touch with us today.
Licensed Insolvency Trustee
Greg Best enjoys working with clients to create solutions for their financial needs.
CPA, CA, CIRP
Licensed Insolvency Trustee
Chris Sinclair believes a practical approach is required to solve serious financial difficulties.
Cynthia’s goal is to ensure that every client feels respected and understood and to instill hope that they can get their life back by giving them the fresh start they deserve.