4 Options For Paying Back Taxes
Do you owe back taxes to the Canada Revenue Agency? If so, you may be anxious about how you can eliminate the debt. Self-employed individuals are usually the most likely to become behind on their tax payments because they're responsible for withholding their own taxes. When your budget gets tight, it's easy to skip a tax payment here and there. Before you know it, you have a large obligation to repay. Fortunately, you have some options available. Here are four ways you can eliminate those back taxes:
Request a tax adjustment. There may be a good reason why you owe back taxes. Perhaps there was a mistake made in your tax reporting. Maybe you had deductions or credits that weren't originally filed on your return. Perhaps your income was overstated. If you have any of these issues, you can apply for an amendment to your return.
You simply submit a letter outlining the details of your situation along with any supporting documents. The CRA will review those documents and then invite you to refile your returns if they believe your original return may have been incorrect. If they don't invite you to refile, you can appeal or you can move forward with finding a way to repay with your original balance.
Apply for the Voluntary Disclosure Program. If the CRA hasn't yet notified you about your back taxes, you may be able to save yourself some money by disclosing the debt on your own. To qualify, you must submit new information or a new return that is at least one year overdue. The information you submit must be complete and your disclosure must be completely voluntary. If you meet those criteria, the CRA will review your file and possibly approve your application. If it does, you will still owe your taxes plus interest, but you may not have to pay any penalties.
Apply for taxpayer relief. The CRA does occasionally offer relief to taxpayers. There are a variety of reasons why the CRA may extend relief. You may have suffered a serious medical trauma that make repayments difficult. You may be unemployed or suffering some other financial crisis. You may simply be unable to pay the debt in full. Whatever the reason, you can ask for relief and attempt to open up negotiations with the CRA. They may reduce the balance or reduce the interest and penalties.
Set up a payment plan. If all of the above fail, your last best choice may be to set up a repayment plan with the CRA. The CRA wants you to make payments, so they'll probably work with you to find a payment schedule that works in your budget. Don't agree to more than you can afford. If you default on a payment, they may cancel the entire arrangement.
For more information, talk to an income tax professional like one from Padgett Business Services Accountant in your area. They can review your situation and recommend a path for moving forward.