If you owe taxes to the Canada Revenue Agency or another tax authority, you have several options available to you. It’s always best to start working with the CRA as soon you know you may not be able to pay your full balance immediately. Working out a repayment plan with the CRA and filing a consumer proposal will help you avoid the CRA placing a lien on your assets or earnings.
Even when you’re unable to pay your taxes, make every effort to file your return by the due date. The CRA adds a penalty for late filings. Currently, the late filing penalty is 5 percent of the taxes owed, plus an additional 1 percent for each month your return was late – up to a maximum of 12 months (a maximum penalty of 17%).
If you have a balance owing, interest will start to accrue on May 1. This would also include any balance that would result from your return being reassessed and a new balance owing being determined by the CRA. The interest charged on unpaid balances is 5 percent per annum, although the CRA may change the rate.
Seeking Professional Help
If you’re unable to pay the tax amounts due, you may benefit from a tax professional’s advice or assistance. There are several kinds of professional help available: accountants, lawyers and specialized lawyers known as bankruptcy trustees. Accountants should be certified as either general or public accountants. Both legal firms and accountancy firms should have a favorable Canada Better Business Bureau rating. Bankruptcy trustee firms should be licensed by the federal government. Before your first visit to any such professionals, calculate all relevant income and organize your tax documents; this will speed the process along and minimize billing hours.