Guidelines For Dealing With CRA and Tax Debt
Recently, there has been a tremendous increase in the number of people in Canada who are subjected to owing their taxes to the Canada Revenue Agency (CRA). If you are an employee working for a company, you don’t have to really deal with the complex processes of paying taxes at the end of the year because your employer will handle them. Your employer will withhold and remit your taxes automatically to the CRA.
However, you could have more than one, two income coming from your other jobs and one employer doesn’t know about the other. You may have pension income also, or you could be self-employed. Are you having difficulties paying hour taxes from your multiple sources of income? Remember, having more than one source of income can lead to significant tax issues if not handled properly.
In this article, we will list out guidelines for dealing with CRA and tax debt problems and CRA collections advice.
Guidelines For Dealing With CRA and Tax Debt Problems
• File your taxes early enough
Of course, doing things early have their benefits. You avoid any repercussions and accrued interest if you do end up owing money to the CRA. Filing your taxes early will give you a larger refund, protect your refund from identity thieves who may want to use your social security number to get your refund. Filing tax early has other benefits such as it eliminates the need for you to worry over deadline tax. Not filing your taxes on time will also limit you from contacting your tax professional as he would be busy with other clients who had filed their taxes before yours.
• File your tax return even if you don’t think you’ll owe.
A tax return is a document that you or a tax expert complete and file with a tax body like the CRA. The government takes information from this tax return to calculate your benefits such as Ontario Trillium Benefit and your Canada Child Benefit. If you don’t file, you don’t get your refund. I don’t think you will have a reason not to file because if you do file, Government will be giving you your money back. Filing a tax return will also give you an easy loan approval because major banks ask for a copy of your tax return. Embassies and consulates also ask for a copy of your tax return to facilitate a quick visa processing and check out your income status. So it’s important you file a tax return.
• Identify your tax bracket
A tax bracket refers to a range of incomes that is subject to a specific income tax rate. In order words, a tax bracket determines the amount of tax income earned pay. It is progressive in the sense that tax increases as individual income grow. Low-income earners fall into the lowest taxable bracket while higher-income earners fall into the higher taxable bracket. If you find yourself owing tax, use the tax bracket and see if you are in a higher income tax bracket or not. If you are in a higher tax bracket based on your total income especially if you have more than one job, make instalments out of your incomes to avoid a large tax liability at the end of the year.
• If you are self-employed, be aware of different deadlines.
Self-employed persons often are confused about having two different deadlines. They need to understand that self-employed persons have extended deadline of June 15th to file taxes, not April 30th. Although the return date is extended, the deadline for any amount owning is still April 30th, and they need to be aware of that. Making payments in instalments is key to avoiding huge tax debt at the end of the year.
• Contact the CRA If you owe them money
If you can make your payment on time, the better because you avoid accrued interests and penalties. If you don’t have all the money, contact the CRA to enable them to make a scheduled payment. Like with any other debt, you may need to find ways to reduce expenses, whether it’s a significant amount or not. Bank loan or assets can help with payment.
• Filing for bankruptcy can eliminate tax debt
It’s important to contact the CRA if you want to file for bankruptcy as a means of not being able to pay taxes. Filing for bankruptcy can eliminate your tax debt, but you need to act on time. If you don’t, the CRA can file a tax lien on the property until the debt is paid, which is a loss to you. Your tax debt is considered a secured debt as it’s now attached to your home once this tax linen is placed on your property.