How to Pay Off Income Tax Debt
Unpaid income taxes can be stressful. And dealing with the Canada Revenue Agency (CRA) on your own can be intimidating, especially since the CRA can withhold tax credits, seize money in your bank account, and garnish your wages. They can also charge penalties and interest on the money you owe until your debt is paid in full.
Unpaid taxes can often be the largest debt for many Canadians. You do have options for repaying this debt, and a Licensed Insolvency Trustee (LIT) can help.
What Can I Do To Repay My Income Tax Debt?
- The first step you can take is to get on top of your tax situation by completing and submitting all outstanding tax returns. It might seem overwhelming, but once you see exactly what you owe, you will be better prepared to figure out how to manage your debt.
- If you couldn’t pay your tax debt due to events beyond your control, like a serious illness, natural disaster, or loss of employment, you may apply for tax relief and see if you qualify to have penalties or interest cancelled or waived.
What If I Can’t Afford To Repay My Tax Debt?
If you can’t afford to repay your current debt, you have options available for relief:
- It may be possible to negotiate with the CRA about the amount of tax you owe by filing a consumer proposal. Our local debt help professionals will assess your situation and create a payment plan that is easier for you and acceptable to the government. Learn more about how a consumer proposal could be right for you.
- If you can’t pay your tax debt to the government, you might consider filing for bankruptcy. A Licensed Insolvency Trustee (LIT) will review your case and help settle your tax debt with the government if you choose to file for bankruptcy.
