When "owe-owe" on your tax return becomes "uh-oh," be proactive to minimize penalties and avoid unpleasant dealings with the tax office.
If you don't have the money to pay the tax you owe, always contact the Canada Revenue Agency before they contact you.
"If you cannot pay your balance owing on or before April 30, we will accept a payment arrangement only after you have reasonably tried to get the necessary funds by borrowing or rearranging your financial affairs," says the CRA.
Most important: even if you can't pay what you owe, always file your tax return by April 30 to avoid the late filing penalties.
Next most important thing: a can-do attitude. Always impress on the CRA your willingness to pay your debt, show you have done everything you can to pay on time (citing reasons, not excuses, for not having the money) and come up with a plan to settle your account as soon as possible.
The CRA usually smiles on plans that involve post-dated cheques or other automatic payment mechanisms like preauthorized debits. You will, of course, be charged interest starting May 1 on unpaid taxes; the current rate is five per cent, compounded daily. However, the CRA is unlikely to allow you to wait to pay off your tax debt just because your other debts' interest rates are higher.
If you don't come up with a satisfactory arrangement, the CRA has substantial collection powers including garnishing your income or your bank account, or seizing and selling your assets.
To discuss a payment arrangement, call 1-888-863-8657 Monday to Friday (except holidays) from 4 a.m. to 8 p.m. PDT. Or use the CRA TeleArrangement service: 1-866-256-1147. To use this service, you will need to provide your social insurance number, date of birth, and the amount you entered on line 150 from your last return for which you received a notice of assessment. TeleArrangement is available Monday to Friday, 4 a.m. to 5 p.m. PDT.
Mike Grenby is a columnist and independent personal financial advisor; he'll answer questions in this column as space allows but cannot reply personally. Email [email protected].
