Income Tax debts owing to Canada Revenue Agency (CRA) include personal income taxes, HST or payroll source deductions. Sometimes individuals running a business get themselves into trouble when not making the required tax installments or remittances for HST and source deductions. Tax debts continue to grow until reaching a point when the debtor realizes he will have difficulty paying it back. CRA will not willingly accept less than full payment of tax debts because they are afraid of setting a precedent that would force them to accept less from everyone else. Consequently, a debtor must take tax debts owing to the CRA very seriously because if not dealt with in a prompt manner, the CRA has powerful tools to significantly disrupt your life.
The tools/powers that the CRA can use include withholding income tax refunds and HST credits, garnishing your wages or accounts receivable, taking funds from your bank account and/or placing a lien on your house until your tax debt is paid in full. CRA can act very quickly as these "super" tools don't require the permission of the courts in order to implement them.
You can only make a deal with the Canada Revenue Agency for tax debts owing by filing a proposal under the Bankruptcy and Insolvency Act (BIA) rather than filing for bankruptcy. A proposal enables you to make a settlement offer to your creditors to pay them a percentage of what you owe. A proposal allows a debtor to keep their assets and to get a fresh start.
If the debtor is unable to offer a proposal then the remaining option is to file for bankruptcy. A bankruptcy will also be able to compromise the tax debts and release the debtor from the tax debt responsibility.
It is important to understand income tax debts and the options available to individuals to deal with them. If you are in this situation, you would definitely benefit from seeking professional advice from a licensed bankruptcy trustee who will review your options. The initial consultation is FREE with no obligation. Call us toll free in the Thunder Bay, Ontario area at 310-8888.
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