Thousands of Canadians struggle with tax problems. One of the worst things that you can do if you have a tax problem that has or will result in a debt that you can’t pay is to try to negotiate with the CRA directly. The reason for this is because the CRA has a single mandate and that is to close your file, whether the money is successfully collected from you or not.
It may sound like it doesn’t make sense, but in fact it does. When a taxpayer is behind filing tax returns or has a large tax debt, the CRA’s success is actually benchmarked by files closed and not dollars collected. This means that, as time goes on, interest and penalties accumulate and by the time you file late returns or decide to try to pay your tax debt, bam – your tax debt may have doubled or even tripled in size.
How does the CRA close files? By coming after you! Leveraging tactics like wage garnishments, sending garnishments to your clients (in the case of self-employed people and contractors), freezing your bank account, placing liens on your property and more… Sometimes one tactic will be deployed or multiples will be deployed all at once. Doing this forces you to do one of two things – pay the debt or go bankrupt or file a consumer proposal – all three result in your file being closed.
This is why negotiating directly with the CRA can be dangerous. The average person doesn’t know what the CRA is capable of, so in good faith will try to negotiate, resulting in more personal exposure.
The CRA will play good cop, bad cop – having one agent go after you and then another swooping in and being nice, delicately extracting your personal information to be used against you at a later date. The CRA may accept a temporary payment plan or suspend an enforcement measure “if” you complete a financial disclosure form that includes telling them any assets that you own, where you work and where you bank.
While the CRA has methods to find out your personal information, why serve it up to them on a silver platter, making it that much quicker and easier for them to come after you?
At the end of the day, if you have a tax debt that you cannot pay you have a financial problem. A financial problem can be resolved through a consultation with a financial consultant who routinely deals with CRA matters. Don’t go it alone – good help is out there.
If you have a tax debt and you need help please call DebtCare Canada at 888-890-0888 or visit www.debtcare.ca.