Money Matters: Dealing with Canada Revenue Agency debt

Well, dealing with debt of any type can be stressful, but dealing with Canada Revenue Agency debt can be exceptionally hard. Whether it’s income tax debt or related to benefit overpayment, the process is sometimes confusing. And joining us now to talk about dealing with this is Blair Matson of SANS and Associates. Good morning, Blair, great to see you. Nice to see you. Thank you. To start things off, maybe just outline the common CRA collectible debts that people are dealing with. Yeah, the most common ones that you see is pretty common sense wise, is your income tax debt. You file your taxes, you owe them a little bit of money. That’s a common way people understand to get into debt. Some things that can surprise people these days are one, if you’re a business owner with GST, regardless of whether you’ve collected it from your customers or not, if you’ve generated over $30,000 in revenue in almost any industry, you’re going to be accountable for GST. So that’s something that can sneak up on people. Two big ones that we’re seeing these days are related to the pandemic, so serve overpayments. Remember that $2000 a month, the government rushed out and they said basically click a few buttons and you’re eligible. A lot of people are finding out they weren’t actually eligible and we’re helping people. Sometimes they owe just a single month, $2000, sometimes almost two years of those benefits. It can be 20 or $30,000 of debt. The last one that we’re seeing a lot of is the CIBA loan. So these were those pandemic era loans that you borrowed 40,000, sorry, you borrowed $60,000, payback 40. If you can do it by the deadline this past January. A lot of those are coming due. A really important thing to know is if you had an incorporated business, you don’t owe that debt personally, just the business does. But if you were a sole proprietor, absolutely, that’s another personal debt is if you owe personal income tax debts. So we’re seeing a ton of questions on those. So when people simply cannot afford to pay that debt off and they don’t do anything, what are the consequences there? Well, the worst thing you can do is ignore the problem. So just not filing your return. That’s what really triggers CRA to take some drastic steps against you. The typical things that they can do so charge interest on the unpaid balances, which can be substantial charge of penalties for failing to file, But they’ve also got more power than any other creditors. So if you owe a credit card, a line of credit, something like that, they have to go to court first, give you notice before they can really start to impact your life. CRE doesn’t have to take any of those steps. They can go direct to your bank, freeze your bank account, go direct to your employer, start to take your wages, even register a title on charge to your property. So the worst thing you can do is to ignore CRA because they might start to take those steps if you work pro proactively with them. Sometimes they will work with you and make things accommodating. It must be so daunting and stressful when all of a sudden it’s like oh I owe 10,050 thousand 100,000 what do I do? So what are the strategies? You got to do something. As you said, don’t ignore the problem. What’s the first step? Well, first step is to get in communication. So you never want to go out Incognito with CRA, you know, don’t go under the wire. You just got to make sure that you’re dealing with them. So file the returns up to date. And if it’s a balance that you think you can pay off in full, usually CRA will work with you over a 6 to 12 month period. They might agree to waive some penalties and interest. They’ll never agree to compromise on the principal unless there’s a significant error that they’ve made. If it’s the case the balance is so high, you know you can’t pay it off. 2 things you can do. There’s one way to renegotiate tax debt in Canada, only one way. It’s called a consumer proposal and only a licensed insolvency trustee can help you with that. 90% of the clients that we’re seeing these days who have tax debt are filing proposals. They’re reducing the debt down sometimes to 20 or $0.30 in the dollar, paying no interest in getting protection. That’s a great, great option for people to consider if the tax that is so severe you can’t even pay off a reduced balance. Personal bank is another way that will get you back to zero. So first objective, pay it off in full. But if you can’t, a proposal is a great option. And certainly if nothing else works, bankruptcy is another way to get you back to zero. And is this record numbers in terms of what you’re seeing, clients experiencing this kind of debt? Yeah, We’ve been around 35 years. Our four busiest months are all in the last four months. So since January, it’s just been crazy. The phone ringing off the hook. We’re seeing a ton of people same day, next day because they’re worried CRA is going to start with their wages or start to freeze their bank accounts. And we can stop all that if people reach out to us early enough. All right, great advice, Claire. Thanks for joining us. Thank you.