Taxes Owing & Liens, Clear CRA Tax Debts

When you can’t clear your tax debt with the CRA, you are required to call the CRA collection officer and make a payment arrangement. Such an arrangement can involve an initial substantial partial payment followed by smaller payments over a set period. Note that the longer the payment period, the higher the interest you will pay for tax debt. Furthermore, you must continue to file timely tax returns with the CRA.

Suppose you are unable to pay your tax debt via a payment arrangement due to insolvency. In that case, you are obligated to contact the Superintendent of Bankruptcy’s office within 90 days of receiving your assessment/reassessment notice. Failing to do so compels the CRA to initiate measures aimed at recovering the debt, i.e. seizing your bank account, placing a lien on your house, garnishing your salary, etc. The CRA can also initiate legal proceedings against you in court.

A consumer proposal applies to individuals who owe the CRA a tax debt not exceeding $250 000. You begin by contacting the Licenced Insolvency Trustee(LIT), which helps develop an arrangement to pay your tax debt. The LIT first evaluates your financial position before providing you with viable ways to pay your CRA tax debt. Your consumer proposal will typically involve paying at least 30% of the debt and the remainder in disbursed payments for a period not exceeding five years. These payments are made through the LIT.

Yes. By law, the CRA is a secured creditor with even greater debt collecting power than a bank. Consequently, the revenue authority can place a lien on your house without even needing to go to court to do so. A consequence of the lien is that the CRA would take all the proceeds that result from the sale of your home. However, you can keep the CRA from putting a lien on your house by filing a consumer proposal with the Licensed Insolvency Trustee or filing for bankruptcy with the Office of the Superintendent of Bankruptcy.