Are There Ways To Negotiate With Canada Revenue Agency About Paying Back The Taxes I Owe?
You can try, and we wish you luck, but realistically it is very difficult or impossible to negotiate an INFORMAL payment plan with Canada Revenue Agency that would allow you more than a brief period, for instance, 6 months or maybe a year, to pay off CRA once they are on to you.
The problems you face include there is no internal CRA payment plan to extend payments that they will share with you, individual collectors who are employees of CRA can vary broadly in what they are prepared to accept, and they seem to be rotated through collection accounts so what is ok with one collector is not ok with the next collector. And this is if you intend to pay your account in full.
If you are looking for a break on the interest or penalty it seems there is some discretion of the collector for the current year, but anything beyond that you can forget it.
We meet with many debtors who owe CRA for unpaid taxes and we are familiar with their tales of what they were able to “negotiate” and it typically is very limited. In the end, if you don’t pay the regular payments they demand to pay off the debt in a short time you can expect a garnishee of your wages if you are an employee, or seizure of your accounts receivable if you are self- employed, or a demand and seizure of your bank accounts.
When you think about it, since CRA is such a large government organization, if you could informally negotiate away a big chunk of the interest and penalty, let alone the basic tax you owe, or obtain an agreement to allow you to pay off the taxes over a long period of time, CRA, in theory, would have to allow the same for everyone else. And you know they won’t let that happen. So it makes sense they don’t. Up till now, we have referred to an informal payment plan where you, or maybe your accountant tries to negotiate directly with CRA on your behalf.
But there is a way to make a FORMAL payment arrangement that not only can potentially make payments stretch out over several years, but also can discount the debt substantially, stop the interest and penalty from mounting, and deal with all of your other unsecured debt at the same time.
A formal plan is a legally binding method of settling your debt to CRA and other creditors using one of the options within Canadian legislation, either a commercial proposal or consumer proposal depending on the amount of the total debt owed to all creditors. These proposals are within the Bankruptcy and Insolvency Act which is federal law. CRA can accept an offer that is formal because CRA, operating within the Income Tax Act, can recognize the validity of other federal law. Seek the advise of an LIT in your locality to see if this option is practical for you.