This year, the CRA extended its deadline to file your 2019 personal income tax to June 1, 2020 due to the impact of COVID-19 (coronavirus). And if you owe on your 2019 taxes, you now have until September 1, 2020 to pay without incurring any penalties or interest. But what if you can’t pay? What options do you have?
What to do if you can’t pay your taxes
“In this world, nothing can be said to be certain, except death and taxes.”
Benjamin Franklin wrote this back in 1789. Over 230 years later, his musings still ring true, even for us Canadians. While some of us might be getting refunds this tax season or just breaking even, there are many of us who will end up owing the CRA. So, if you owe the CRA money and aren’t able to pay them, what should you do?
Object to the Taxes You Owe
To err is human, and even the taxman can make mistakes! If you truly disagree with your tax assessment and the amount you owe, you can object to it. You can file an objection by doing any of the following:
- Register online through My Account, a secure portal that lets you view your personal income tax and benefit information and manage your tax affairs online. Then use the “Register my formal dispute” option in your online CRA My Account.
- Sending a signed letter to your local CRA appeals centre.
- Completing and filing a Form T400A, Objection – Income Tax Act.
Seek Taxpayer Relief Provisions
Canadians struggling financially may be eligible for Taxpayer Relief Provisions. Provisions include cancelling or waiving interest or penalties.
The CRA provides options for Canadians who are in emergency situations. An emergency situation could include a job loss or other circumstances that are beyond your control, such as COVID-19, as well as a natural disaster, an illness, a death in the family, or serious emotional or mental stress.
Of course, you’ll need to prove that, in addition to these circumstances, your finances are in bad shape and that paying the CRA would make it difficult for you to afford the basic necessities of life. Plus, it’s important to understand that even if you do qualify, you’ll still owe your tax debt; the CRA will just waive or cancel interest and penalties.
If you cannot file your 2019 tax return by June 1, 2020 due to COVID-19 and/or you cannot make tax payments by September 1, 2020 due to COVID-19, you can request the CRA to cancel any penalties or interest by submitting a request online. Click here to learn more about the process.
To request taxpayer relief, such as cancelling or waiving interest or penalties, you’ll need to fill out Form RC 4288 and provide all the facts and documentation supporting why you feel charges should be cancelled or waived.
Enroll in a CRA Tax Payment Arrangement Plan
If you can prove to the CRA that financial hardships have set you back, but that you will eventually be able to pay, you may want to try a CRA tax payment arrangement, where you make smaller payments to the CRA until you pay off all of your tax debt, plus applicable interest.
To qualify for a CRA payment arrangement, you’ll need to prove your current inability to pay. So, be prepared to share details regarding your income, expenses, assets, and liabilities. (If you need help putting a budget together, you can download our free Budget Planner + Expense Tracker.)
You typically need to have filed your tax return before you can set up a CRA payment arrangement, so it’s important to be sure to complete all forms before applying; this will also help to spare you from additional interest charges.
There are three ways to set up a payment arrangement plan with the CRA, although all three services may not be currently available due to measures taken surrounding COVID-19:
If you’re able to make some payments toward the amount you owe, you can authorize the CRA to withdraw a specific amount directly from your bank account. To do this, you must sign up for My Account through the CRA and set up a pre-authorized debit. (You can do this here.)
CRA’s Automated Phone Service
You can also make payment arrangements through the CRA’s automated phone service by calling 1.866.256.1147. Before you call, be sure to have your last assessed tax return in hand; you’ll need to provide the automated service the amount entered on line 150 during the call, along with your social insurance number and date of birth.
Speak with a CRA Agent via CRA Collections
Under normal circumstances, you would have been able to request that a CRA call centre agent give you a call to set up a payment arrangement, simply by calling 1.888.863.8657; however, this option is no longer available due to COVID-19. The good news is you can set up a payment arrangement over the phone with a CRA agent, such as a collections officer, by calling CRA Collections at 1.800.675.6184 between 8am-4pm your local time.
Owing Money to the CRA
You can’t let CRA collections and tax debt slide. After all, this is the Government we’re talking about! If you owe taxes to the CRA and don’t pay up, they are likely to arrange for your paycheque to go straight to the government; they can even seize and sell your assets.
Tax Relief with Credit Canada
Owing money to the CRA is no fun, and while Credit Canada can’t clear your debts with the taxman, we do offer financial assistance that can improve your ability to pay up. Through our debt consolidation services, we can negotiate with your creditors, reduce or stop the interest on your unsecured debt (e.g., credit cards, payday loans, utility bills, etc.), and lower your monthly payments.
By entering a Debt Consolidation Program, you can free up cash in order to settle any taxes you might owe. Plus, if you owe taxes and you sign up for a Debt Consolidation Program, it may work to your advantage if you’re trying to get on a CRA tax payment arrangement plan; it shows that money is tight but you’re doing what you can to make good on what you owe!
To learn more about your debt consolidation options, or for some free and confidential financial advice, give us a call at 1.800.267.2272 or contact us online. To learn more about taxes and the implications of the Canadian Emergency Response Benefit (CERB), check out our free webinar on taxes and CERB. Remember, we’re here to help during these “taxing” times!