Tax Debt Relief in Ontario

If you owe tax debts to Canada Revenue Agency we can help

Tax Deb Relief

Is tax debt causing you financial pain? If so, we can help you get rid of it for good

Tax debt relief options available in Ontario

While some look forward to a generous tax refund from the Canada Revenue Agency (CRA) during tax season, others wind up owing money to the government agency instead.

If this describes you, you’re not alone – many Canadians find themselves looking for tax deb relief. Canada’s tax laws are complex and numerous, so it’s easy to get caught off-guard and discover you owe more tax to the CRA than you previously thought.

Suppose you’re already heavily in debt and struggling to make your payment on time. If so, the added weight of a tax bill can be your breaking point, leading to severe financial and emotional distress.

Luckily, there are tax debt relief options available in Canada. Our knowledgeable and personable team of Licensed Insolvency Trustees can help you find the right solution to lighten your debt load. They’ll explore options to arrange with the CRA a tax debt settlement. And depending on your circumstances, assist you in eliminating your tax debt entirely.

What happens if you don’t pay your tax debt to the CRA?

The CRA holds vast and powerful collections powers – and can exercise them at will should you fail to pay the taxes you owe. 

In the first place, the CRA will levy a 5% late-filing fee (10% if you filed late in previous years) and a 1% interest charge per month on your balance owing for up to 12 months. Interest will accrue daily.

If enough time passes by and you haven’t paid your tax debt, the CRA can also

  • Garnish your wages 
  • Seize your investment accounts 
  • Freeze your bank account
  • Place liens on your assets
  • Withhold federal benefits you receive, such as the GST rebate, Canada child benefit, and Canada Pension Plan (CPP)

Dealing with tax debt in Ontario – what are your options?

Here are the top ways to achieve tax debt relief in Canada: 

  • Negotiate new payment terms with the CRA directly
  • Repay your tax debt using a debt consolidation loan
  • File for a consumer proposal 
  • File for personal bankruptcy

Before we explore each option, it’s important to note that only a consumer proposal and bankruptcy provide you with legal protection from the CRA’s collection powers. Both debt relief programs will immediately stop collection calls and grant you protection from lawsuits, wage garnishment, and asset seizure

Negotiate a new payment plan with the CRA directly

The CRA offers two tax debt relief programs for Canadians. If you’re unable to pay your balance by the due date, you can:

  • Arrange to repay your debt through installments or
  • Submit a request for taxpayer relief

Pay your debt in installments

Unable to pay off your tax debt with a lump sum payment by the due date? If so, you can enter into an installment payment plan with the CRA

The flexibility of a monthly payment plan can relieve considerable financial pressure. You can spread your payment over a set time period based on what you can afford to pay each month. 

It’s crucial to remember that you’re required to repay your debt in full under an installment plan. The CRA won’t agree to any form of debt forgiveness. For this reason, hiring a debt settlement company to help you negotiate a reduced balance won’t do you any good.

Apply for taxpayer debt relief

If you’re in dire straits financially, you can contact the CRA and request to have your interest charges and penalties waived. To secure approval, you must demonstrate that you lack the means to pay off your tax debt due to extreme personal or financial circumstances.

You can ask the CRA to forgive interest and penalties for tax years going back up to 10 years from the date you file your request. To kickstart the process, complete and submit form RC4288.

Repay your tax debt using a debt consolidation loan

A debt consolidation loan is another option for paying off your tax debt. This loan enables you to combine multiple debts you owe under a single monthly payment plan. It also offers a low-interest rate, netting you savings on interest costs and making your payments more manageable.

However, let’s say you cannot secure a favourable rate. In that case, you won’t realize any benefit by transferring your tax debt to this kind of loan, aside from getting the tax authorities off your back. You’ll still be responsible for repaying your entire balance through your new loan. And any assets your own that secure the loan are up for grabs by your lender should you default.

Reduce your balance with a consumer proposal

By filing a consumer proposal, you can significantly reduce the tax debt you owe to the CRA. A consumer proposal is a debt-relief program offered by the federal government through the Bankruptcy and Insolvency Act (BIA). It allows you to negotiate a new payment plan with your creditors for any unsecured debt you owe, like credit cards and lines of credit. Tax debt also qualifies as unsecured debt.

This unique program will allow you to reduce your outstanding tax debt by up to 80%. As a result, you’ll have much more room in your budget to repay your remaining balance. Provided that half of your creditors agree to the terms of the revised payment plan, you can make monthly payments to settle your debt over five years.

A consumer proposal offers numerous advantages:

  • Payments are based only on what you can afford 
  • No interest charges or penalties accrue
  • No requirement to surrender your assets

In Canada, the only individual who can administer a consumer proposal on your behalf is a Licensed Insolvency Trustee. 

Eliminate your tax debt by filing for personal bankruptcy

Is it possible to clear your tax debt through bankruptcy? Absolutely! Since 1992, the CRA’s status under the BIA has been that of an unsecured creditor, which means you can legally discharge your tax debt through bankruptcy (unless the agency has already secured the debt through a lien on your assets).

Like a consumer proposal, bankruptcy is a legal proceeding governed by the BIA. As such, you must enlist the help of a Licensed Insolvency Trustee to carry it out on your behalf.

Bankruptcy will eliminate your tax debt and most, if not all, of the other unsecured debt you choose to include when filing. Once the legal process is complete, the tax debt you owe to the CRA will disappear, enabling you to rebuild your finances from the ground up.

However, taking the bankruptcy route should never be taken lightly – there are serious negative consequences to consider.

First, the impact on your credit standing will be severe and prolonged (bankruptcy can remain on your credit report for seven years). Second, you must surrender your assets (with some exceptions) to resolve your debts.

Our professional recommendation

Appealing to the CRA to negotiate new payment terms or eliminate the interest and penalties is a viable solution to obtain tax debt relief. Similarly, a debt consolidation loan will enable you to immediately pay off your tax debt and make monthly payments through a new, low-interest loan.

However, in both cases, you’ll still be under obligation to pay 100% of your balance. Depending on your tax bill’s size, these options may prove insufficient in providing the debt relief you need to resume a quality life. This is especially true if you’re already having difficulty servicing other debt obligations like credit cards.

If you need to take drastic action to get your tax debt under control, filing a consumer proposal is a superior alternative. You can legally discharge a large chunk of your debt – and you won’t have to pay a dime in interest charges or penalties on the remaining balance.

Bankruptcy is another option to consider. But only as a last resort, given the repercussions we mentioned.

Unsure of which path to take? If so, book a free consultation with one of our Licensed Insolvency Trustees. They’ll discuss your debt relief options in detail to see if a consumer proposal or bankruptcy is the ideal way to slash your tax bill.

Either way, you’ll gain the opportunity to settle your CRA tax debt safely and effectively.

See how much you can save through a consumer proposal using our handy debt calculator. Or, if you’re ready to chat, feel free to contact us – we’re happy to help you every step of the way!

Getting into debt is easy. Getting out is a different story.

But it's still possible!

Did you know there is a Debt Program federally regulated by the Canadian Government, designed to help citizens avoid claiming bankruptcy? This amazing program can only be administered by a Licensed Insolvency Trustee (LIT).

If you’re struggling to make your payments every month and creditors won’t stop calling, we can help.

What our clients are saying.

Based on 773 reviews
I was quite nervous and a little embarrassed that I needed financial advice. I met with Jerry Janiec and he was very helpful. He made me feel comfortable and explained everything in easy to understand terms so that I understood what my options were. I would recommend David Sklar & Associates for anyone in my position.
19:53 11/17/22
I was fortunate enough to be referred to David Sklar & Associates Inc. by a family member. Now in the10th month of a Consumer Proposal process, I am very impressed with the organization, professionalism and impeccable customer representation that I have experienced. To this effect, I amparticularly thankful to Jerry Janiec and Rhoda Lewis for their excellent work.
12:21 11/16/22
Recently dealt with Christine at David Sklar & Assoc. and worked out a Consumer Proposal to put forth to my creditors for my Credit Card debt. She was very courteous, professional and put me at ease with a proposal that I can afford on a monthly basis, which will eliminate my debit in a reasonable timeframe. I would recommend Christine and this firm in a heartbeat. Very happy with the service and attention I got !!
01:59 11/15/22
Excellent customer service. Special thanks to Olga for being prompt and helpful. She’s a star. Bibi is helpful as well. Great agency to work with.
19:28 11/14/22
After seeing your commercial play on CP24, I realized that it addressed all the questions and concerns I had about my financial situation. It all started with my one phone call to your office. I had the extreme pleasure of working with Cori Naron at your St. Clair West office in September 2022. She took the time to explain what my options were knowing that it was a very stressful situation with my debt load. She made me feel at ease with my decision to file a consumer proposal and outlined the benefits to me. She is thorough and her attention to detail is outstanding. While it takes a little while to reap the benefits of making this hard decision, she took the time to reassure me that it was in my best financial interest. Well done David Sklar & Associates for having such an amazing representative at your company and for allowing me to "get a fresh start"!
14:31 11/14/22
Very highly perfection individual, well executed and greatly knowledgeable in his work, which guided me me the right decisions making opportunities. Thank you.Sincerely, Peter Romasz
20:18 11/13/22
Trina Powell was very helpful and made the process very easy. Thanks again for all your help.
17:59 11/06/22
Jerry is a caring, trustful, knowledgeable and competent Sklar associate. He understood my needs and quickly went to work on my behalf. Ever indebted to David Sklar and Associates and especially to Jerry for his professionalism and caring approach.
19:31 10/31/22
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