We have Scott Hannay, a former CRA collections professional, sharing valuable insights into how individuals and businesses can deal with tax issues and navigate CRA collections. With over a decade of experience at the CRA, Scott discusses the ins and outs of CRA collections, offers advice for taxpayers facing financial difficulties, and provides options for reducing or managing debt.
Scott’s Background: Understanding CRA Collections
Scott worked at the CRA for about 10 years, specifically in collections. His job involved visiting individuals at their homes, discussing outstanding tax debts, and working out repayment plans. “You may not have 50,000 in your pocket, but if we communicate openly, we can figure something out,” Scott notes. This approach reflects a more compassionate side of the CRA, even when handling debt.
The Reality of CRA Audits and Debt
Many individuals and businesses find themselves under CRA scrutiny due to a variety of reasons. For individuals, the challenge often arises when income isn’t properly deducted at the source, or when people hold multiple jobs. For businesses, economic downturns or mismanagement of tax funds to keep operations afloat can lead to debt.
Scott emphasizes that debt sometimes accumulates even before an audit begins, as circumstances change, and people struggle to keep up with tax obligations.
How CRA Responds and What You Should Know
If you owe the CRA money, the interest on your debt can rise quickly. Right now, interest is about 10% per year. Once the CRA is aware of the debt, they’ll send a legal warning, giving you 14 days to respond. If you don’t, they’re likely to take legal action.
“Keeping communication open is crucial,” Scott explains. “When you don’t respond, it triggers a series of actions that could escalate the situation quickly.”
How to Work with the CRA: Key Advice
If you’re facing tax issues, here are some essential points Scott shares for handling the situation with the CRA:
- Communication is essential: Keeping open lines of communication helps avoid escalation. The CRA will often give you options based on your financial situation.
- Full financial disclosure: If you owe taxes, be prepared to show proof of your financial situation. The CRA will want to see bank statements, receipts, and a clear breakdown of necessary vs. discretionary spending.
- Negotiate repayment terms: While the CRA generally seeks full repayment as soon as possible, Scott notes that in some cases, repayment plans of 18-36 months are possible. It’s important to demonstrate your willingness to work out a solution.
Bankruptcy vs. Consumer Proposal: Which Option Is Right for You?
For many, a consumer proposal can be a better alternative to bankruptcy, especially for businesses. Scott explains that a consumer proposal can reduce debt significantly without completely wiping out everything you owe. Unlike bankruptcy, it allows individuals to remain as business directors.
While a bankruptcy process might prevent you from operating your business, a consumer proposal can help you resolve debts while still maintaining some flexibility in your professional life.
Avoiding Personal Liability as a Business Owner
Business owners, especially directors, should be aware of their personal liability for certain debts. If a business defaults on taxes such as source deductions, directors can be held personally responsible. Scott notes, however, that directors can defend themselves if they prove they took due diligence to manage tax obligations.
The Importance of Professional Advice
Scott’s key piece of advice for anyone in debt to the CRA is to seek professional help. Whether you’re an individual struggling with taxes or a business owner facing mounting tax debt, having an advisor can help you navigate the complexities of CRA procedures and find solutions.
“Seek out professional advice early,” Scott stresses. “Whether it’s an accountant or a consultant at Goldhar & Associates, we’ll help you understand your options and timelines.”
Summary
Navigating CRA debt can be intimidating, but with the right advice and strategies, you can avoid the worst-case scenarios. Communicating with the CRA, providing complete financial disclosure, and working out a manageable repayment plan can go a long way toward resolving your tax issues. If you’re struggling with tax debt, reach out for professional guidance to explore options like consumer proposals, and protect your financial future.
Key Takeaways
- Keep communication open with the CRA to prevent legal action.
- Full financial disclosure is crucial when negotiating repayment.
- A consumer proposal can be a flexible solution for reducing tax debt without losing your business.
- Business owners need to be aware of personal liability for unpaid tax obligations.
- Seek professional advice early to navigate the complexities of CRA collections.
For more information on dealing with CRA issues or to discuss your situation with a professional, contact Goldhar & Associates Ltd. We specialize in helping individuals and businesses navigate financial challenges and find the best solutions.
Visit Goldhar Consulting and Tax Services Webite.