Receiving a collection letter from CRA can be intimidating, and when you are struggling with debt instinct may be to ignore the envelope without opening. I caution that ignoring the letter is not a solution and will cause you more stress down the road. CRA has higher collection rights than most creditors and can garnish wages and pension income; freeze bank accounts; issue Third Party Demands to your customers to pay CRA directly; and put a lien on your assets, even your home. I recommend you open the letter and:

  1. Review the details to ensure amounts reported are correct. CRA can arbitrarily assess you for tax returns that are not filed and you have limited time to object or file accurate returns.
  2. Review your liquid assets to determine if you can pay the amount owing in full. Nobody likes to cash investments, but if they are making minimal interest, it makes monetary sense to cash them in to pay higher interest bearing debt.
  3. If you are unable to pay the debt in full, contact CRA to discuss payment arrangements. CRA will typically work with you if you keep communication open and make monthly payments. Review your budget to see how much you can afford to pay CRA monthly to satisfy your debt. CRA will charge interest on the balance owing so the sooner you can pay, the better.
  4. If you are unable to make satisfactory payment arrangements with CRA – reach out to a Licensed Insolvency Trustee to discuss insolvency solutions. Amounts owing to CRA for personal income tax and HST can be included in a bankruptcy or proposal.
    A proposal offers a compromise to your creditors payable over a maximum 5 year time period and stops further interest. The trustee’s fees are also included in your proposal payments.

As a LIT with Taylor Leibow Inc., I have been helping taxpayers deal with unmanageable debt to CRA for over 30 years. Open the collection letter from CRA and reach out to me today.

Kathy Lenart

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)