The CRA Assessed Me. What's Next? (MNP 3 Minute Debt Break)

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magine receiving a call with the message, "This is the Canada Revenue Agency calling. We assessed your tax return that you didn’t file, and you have a significant balance owing." Does this scenario seem all too familiar? It's a situation many Canadians find themselves in, often due to oversight or confusion regarding tax obligations.

If you fail to file tax returns, the CRA is bound by duty to nudge taxpayers towards compliance. This is part of what's known as the non-filer program. Under this initiative, the CRA employs several methods to ensure you meet your filing obligations, including issuing demands for returns, assessing your situation under the Income Tax Act, conducting field visits, and, in extreme cases, pursuing legal action.

It's important to note that the CRA generally does not target individuals who do not owe taxes. However, this doesn't mean you can skip filing your taxes. So, what should you do if you find yourself on the receiving end of a CRA assessment indicating you owe money? Here's a structured approach:
Understand the Assessment: Realize that the CRA's assessment is based on the information they have, which might not be complete or current.

Respond, Don't Ignore: Ignoring calls or letters from the CRA can escalate the situation. Remember, if they've assessed an amount, you're legally obliged to address it.

Gather Your Documents: Start compiling your tax information. You might need to file a tax return for the years in question. And communicate with the CRA about payment arrangements. If paying the full amount immediately isn't feasible, explore what can be mutually agreeable.

If an acceptable payment arrangement can't be made, consider alternative solutions like a Consumer Proposal or Bankruptcy under the Bankruptcy and Insolvency Act. These options allow you to negotiate a settlement with unsecured creditors, including the CRA, though they come with their own set of considerations.

Consumer Proposals offer a way to make a settlement offer, which creditors can counter. The goal is to reach an agreement that's financially manageable for you. Bankruptcy might be an option if your personal tax debt is high, and if it exceeds $200,000 the process often involves court proceedings and could require additional payments beyond what was contributed to the bankruptcy estate.

In a nutshell, facing CRA tax assessments head-on with a clear strategy is crucial. If you find yourself in this situation, seeking professional advice can provide you with a roadmap to a fresh financial start. Remember, understanding your obligations and the options available can transform a daunting scenario into a manageable journey.

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