Your slips are all in, the forms compiled and submitted and you’re waiting for the bottom line. A triumph for those expecting money back, or a nerve-wracking wait for those with a bill – yes, it’s tax time! If you’re in the category of people who frequently owe money to Canada Revenue Agency, or even if it’s your first time on that side of the balance, read on for some tips on how to deal with your tax debt:
DO: Ask for help filing your return if you feel it’s beyond your paperwork skill-set. If your return is basic and consists of a T4 or two, chances are you could file it yourself without missing out on credits. For people who are self-employed or who have more complex finances, it’s a good idea to have reputable bookkeeper or accountant check over your return to make sure you’re getting all the benefits you may be entitled to.
DON’T: Try to “outsmart” the government by making claims that are uncertain. If you are eligible for certain deductions or credits, by all means use them, but be wary of write offs that seem too good to be true – they probably are. Recent charitable donation schemes for example, have left many taxpayers with a large bill on their hands. As cautioned above, if you’re unsure – ask a reputable, qualified professional first.
DO: Look at why there is a balance owing and try to correct this going forward. If there’s more tax due this year because you withdrew from your RRSPs or you have more than one job and aren’t having enough tax withheld at source, make note and either set aside more throughout the year, or better yet ask one of your employers to remit a little more each paycheque.
DON’T: Stop filing altogether because you think you’ll be continually adding to the balance. Not filing returns for a long period of time can result in many other problems, such as a back-log of MSP premiums due, and not receiving Child Tax or even GST benefits that your family may be entitled to. Allowing returns to pile up year after year isn’t likely to help in the long run, and eventually it will probably just mean lost sleep down the road.
DO: File AND pay on time. Balances due must be paid on or before April 30th each year, and unless you or your spouse was self-employed your returns should be filed by then as well. Late returns can mean accumulating interest unnecessarily, as well as fines and penalties.
DON’T: Ignore the bill if you owe. Canada Revenue Agency is a powerful creditor and disregarding the balance owing you may have can result in serious collection action such as bank account seizures or even a garnishment of your pay.
DO: Be aware that there are two options for dealing with unmanageable tax debt. Both a consumer proposal, or bankruptcy can eliminate or reduce tax debt, more importantly they are the only options that can. If you find yourself in a position where the debts are out of hand, speak with a licensed trustee about your situation, they are legally empowered to assist you with Canada Revenue Agency debts.
As the expression goes, two things in life are certain – death and taxes – while we can’t control one, we can certainly help guide the other!
To speak confidentially with a licensed trustee in your area, please contact us for a free consultation.