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A lot has changed over the past 200 years, but those two simple truths live on. Much as it may irk some, cost more to others and confuse many, filing taxes is the law, plain and simple.
As Licensed Insolvency Trustees and debt consultants, we regularly hear the same feelings, fears and misconceptions about filing taxes, paying taxes and what happens when tax debts are too burdensome face. To help reduce some of that anxiety and uncertainty, let’s take a deeper look at some of the most frequently asked questions and concerns Canadians have about taxes and the options available for those struggling to pay off tax debt for good.
This happens more than you might think. Someone avoided filing their taxes one year, and suddenly that turned into a decade. They changed jobs, started a business, moved provinces and started a family. Now they need to get their taxes in order, so they can apply for the proper tax credits and medical coverage.
For this person, the biggest barrier to getting their taxes up to date is the sheer amount of information they
think they need to start the process. Contrast that with the amount of work it would require to do nothing at all – it’s no wonder they keep putting it off.
If you’ve been an employee your first step will be to register your online account on the Canada Revenue Agency (CRA) website. There, you can access your annual tax slips which include your annual income, deductions and tax payments for the previous years you’ve yet to file.
If you’ve been self employed, download your bank statements for the tax years you’ve yet to file and begin calculating your income for each of those years.
Create a simple chart (either on paper or in a spreadsheet) to organize the pertinent information for each year you need to file your taxes. Critical details to capture include:
There may or may not be some blank spaces in your chart – don’t fret. Once you build some momentum, you may be surprised by how much you remember.
With this summary in hand, you’ll be ready to begin completing your tax returns – whether online yourself, or with the help of a professional.
Whether it’s an enormous tax bill or imagined penalties – such as fines and late fees – fear of the unknown prevents many people from filing their taxes. If this sounds like you, it may be helpful to keep the following mnemonic in mind whenever apprehension strikes.
From best- to worst-case, our imaginations run wild with all sorts of simulations, scenarios and ways events will play out. However, because the most severe versions of that story carry the strongest emotional weight, those are generally the ones that stick in our memories in an endless loop. That fuels procrastination, which amplifies the original worry and repeats the cycle. The best (and only) way to silence the rumination is to do the work and learn the true reality of the situation.
There have been numerous cases where people have avoided filing their taxes for years yet have ended up either owing very little or even receiving a substantial refund. Imagine the relief you’d feel finally having your taxes in order, some money in the bank and seeing that looming black cloud of unfiled taxes finally lift from above your head.
Take the leap. Get your taxes done. The results may be much more favourable than you think.
From the frustrating forms to not knowing what slips and receipts to include and general confusion about what credits apply to what situation, the tax process can seem overwhelming. Worries about getting it wrong and getting into trouble prevents many people from even attempting to file their taxes.
The good news it the process has evolved significantly over the years. Gone are the days of complicated forms and instruction booklets you used to have to pick up at the post office every spring. Now, anyone can access their tax slips online and file their return directly on the CRA website.
There are also several free and paid online tax filing programs which walk you through the entire tax return, step by step, with easy to understand questions and instructions. Taking advantage of these programs allows you to capitalize on any allowable deductions and identifies available credits you and your family may qualify for.
Alternatively, if your taxes are more involved or the process still feels too complicated for you to manage on your own, a professional tax preparer remains a valuable option. Whether you contract the services of an independent business or an accounting firm, working with a knowledgeable professional can alleviate many of these tax anxieties you may be experiencing.
While it may be an unfounded fear for many, owing a large amount of money is a reality some taxpayers will have to contend with at some point in their lives. And that financial burden can be difficult to face head on. But as tempting as it is to simply avoid the issue and hope it will go away, this is not a sustainable approach and will only worsen the problem.
It’s important to communicate early with the CRA about your intentions to pay the amount owing on your tax bill. Be honest and reasonable about your monthly payment capabilities. The sooner you connect with them and acknowledge the debt, the more agreeable they will be to negotiate a payment arrangement. Forcing them to chase you down for payment will erode any goodwill and likely result in more expensive and rigidly enforced payment structure.
If the debt is overwhelmingly high and beyond your capabilities to pay – or if you have been struggling for several years to repay old tax debt – you may benefit from the assistance of a Licensed Insolvency Trustee.
There’s a common misconception that tax debts will never go away. Even when considering a Life-Changing Debt Solution, few people are aware that tax debts are eligible for inclusion in a Bankruptcy or Consumer Proposal.
You will likely be relieved to learn that tax debts
can go away. And that it
is possible to discharge personal income taxes, GST, PST and even source deductions in an insolvency proceeding. Depending on the amount and type of debt and your current business situation, it is likely possible to tailor a suitable solution for your unique circumstances.
If you were to file a Consumer Proposal, you would offer to pay a certain percentage of your tax debt to the CRA. They would have a 45-day period to review your final and proposal terms and decide whether to vote for or against your proposal.
If they voted in favour of your offer, you would make one payment per month over a certain number of months until the amount you agreed on was satisfied. If they voted against, negotiations would likely continue until you reached a mutually agreeable number.
However, if your tax debt is significantly high – or you’re unable to reach an agreement with the CRA – a Consumer Proposal will not work. In that case, you may want to consider a Bankruptcy proceeding instead. This would discharge your tax debt upon successful completion.
It is important to note, though, in cases where personal tax debt exceeds $200,000, the CRA may obtain a court order for repayment of a small portion of taxes over a period after the bankruptcy is complete.
Depending on your life circumstances, these may be viable options for you to eliminate your tax debt. Though, it’s usually best to visit a Licensed Insolvency Trustee for a no-obligation Free Confidential Consultation to learn what you qualify for and what your best course of action may be – especially when it comes to large tax debts. When deciding whether to make that appointment, earlier is always better to get the outcome you want and the greatest number of opportunities to choose from.
Filing your taxes is inevitable. Owing money is possible. But so is receiving a refund. Why not find out today?
If your first step is catching up on your taxes, we would be happy to connect you with an MNP tax professional at a location near you. They can provide you with valuable tax insights and assist you with getting yours filed right away. You’ll finally have peace of mind. The CRA will be happy. And with MNP on your side, you’ll be ready for the year ahead without he added stress and anxiety.
On the other hand, if you’re already caught up and facing an impossible tax debt, contact one of our Licensed Insolvency Trustees for a Free Confidential Consultation today. We’ll review your entire financial situation, learn your goals and determine your options for a financial fresh start. Whether you qualify for a Life-Changing Debt Solution – such as Bankruptcy or a Consumer Proposal – or would benefit from another option, our team will help you make the best decision to finally defeat your tax debt for good.
Based out of Surrey and the Fraser Valley,
Linda Paul is a Licensed Insolvency Trustee and Senior Vice President at MNP LTD. To learn more about how MNP Debt can help, contact our local office at 310.DEBT (310.3328) or toll-free at
Based out of Courtenay,
Jacobson is an Assistant Estate Manager at MNP LTD. To learn more about how MNP Debt can help, contact our local office at
1.877.363.3437 or toll-free at 310.DEBT (310.3328).
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*310-DEBT doesn’t operate in MB, NW ON and QC.
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