What Can You Do If You Can’t Pay Your Taxes?
Communicate with the CRA: Reach out to the CRA to explain your situation. Ignoring tax debt can lead to severe collection actions, such as wage garnishments or asset liens.
Set Up a Payment Plan: Propose an affordable payment arrangement to manage your debt over time.
Seek Professional Help: A tax advisor or financial planner can assist you in understanding your options and negotiating with the CRA.
1. Payment Arrangements
The CRA allows you to set up a payment plan if you cannot pay your taxes in full.
How it works:
Contact the CRA to discuss your financial situation.
Propose a payment schedule based on what you can afford.
Interest: Interest will still accrue on the unpaid balance, but regular payments can help avoid further penalties.
2. Taxpayer Relief Program
The Taxpayer Relief Program may reduce or waive penalties and interest in certain circumstances.
Eligibility criteria:
Financial hardship (e.g., inability to pay due to low income or unexpected expenses).
Extraordinary situations like illness, natural disasters, or CRA errors.
How to apply:
Submit Form RC4288 (Request for Taxpayer Relief) with supporting documentation explaining your situation.
Important Notes
Interest charges will continue to accrue on unpaid balances until fully paid.
The CRA may escalate collection activities if no effort is made to address your debt.
Why This Matters
Facing tax debt can feel overwhelming, but the CRA offers practical options to help you manage it. Taking prompt action minimizes penalties and keeps you in good financial standing.