#FinancialFridays: What IF you owe income tax?
What IF…You OWE Income Tax?
While the majority of the population can expect a return from income tax filing; every individual or family’s tax circumstances are unique.
To find out if you will have a refund or owe taxes, it is important to file all your outstanding tax returns. Getting tax advice when reviewing your past returns to ensure you are taking advantage of all the possibilities of reducing your taxes can be a good idea. At the end of the day you need to know if you owe the government and if so, how much you owe.
There are a variety of reasons why you owe and understanding those reasons can help you plan for the next year’s filing.
So what IF you owe income taxes this year?
If that is your case, it is important to sit down and have a financial review to determine how to pay off that balance. Just like any other type of debt, ignoring your income tax debt is never a good idea–it will never go away! Any debts unpaid will eventually build up interest and penalties that will quickly increase the balance owing! If you have available funds, it is best to pay your debt all at once, in full and on time, to avoid the interest and other legal and financial consequences.
The deadline to pay your taxes this year is May 2nd, 2022.
IF you do not have the money right now to pay your income tax balance within the CRA’s timelines, here are some OPTIONS to consider
when dealing with government income tax.
First, call the Canada Revenue Agency (CRA) at 1-888-863-8657 (Mon-Fri 7am – 8pm ET) and work with the CRA agent to figure out the best solution applicable to your situation.
• Find out if you qualify for Taxpayer Relief Provisions – if you or your family had certain extreme circumstances that were beyond your control, the government may agree to cancel or waive your penalties and interest. Be prepared to still pay off all your tax debts and understand that there is a limited time to pay them back.
• Ask the CRA agent to help you set up a re-payment plan or a payment arrangement for your income tax debt. – this is an agreement with the CRA that you will pay your balance in several regular payments over a period of time.
• If you are employed, you can ask your employer to remit (take off) an extra $10 or $50 or whatever you can, when they do your pay cheque, weekly, bi-weekly or monthly. That will help ensure you can budget for repayment, and perhaps next year any overpayments would be returned as a refund. This plan works really well if you KNOW you’re going to owe more (cashed in some RRSPs?) for 2022.
Second, reach out to Sharon at the United Way of Bruce Grey! Our Financial Literacy Program can help guide your financial direction and it is 100% Free and Confidential. We can set you up with a no-obligation consultation with debt experts to explore what works best for you;
• Non-profit Debt Consolidation Program e.g. Credit Canada – A Certified Credit Counsellor can review your debt situation, discuss your options and explain the pros and cons of each option.
• Government Licensed Insolvency Trustee (LIT) e.g. MNP, Licensed Insolvency Trustee) – Trustees can provide an unbiased perspective and explore options with you, including filing a Bankruptcy or Consumer Proposal. Credit Counselling is a mandatory part of the program to help you better understand the root cause of your financial difficulties and avoid falling into the same habits. If you are insolvent, meaning you are no longer able to pay bills or other obligations, a trustee can help successfully negotiate with your creditors on your behalf.
You are the master of your own financial journey – the decision is yours to make!
– Sharon Safra, Financial Literacy Program Coordinator
Do you know someone experiencing financial distress? Struggling to pay bills or drowning in debt? Confused or clueless about your next steps to move forward? Make time to set up an appointment for a Financial Review with Sharon Safra at email@example.com or call directly at 519-378-4773.