What To Know about CRA and CERB Debt
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By Bromwich+Smith Staff | 1269 words | Reading Time: 6 minutes | Date: 2023/07/05
Is often viewed as one of the scariest creditors, after all who wants to owe money to the Government? In reality many Canadians who reach out for debt relief list the Canada Revenue Agency as one of their creditors. So, what happens if you owe money to the CRA?
The CRA may garnish your income, put a freeze on your bank account, seize and liquidate your assets to attempt collection on the debt you owe. Before they are able to start any legal action, the CRA must do the following: make 3 attempts to give verbal legal warning by phone and then send 1 written legal warning letter. This is a huge reason why it is so important to pick up your phone and talk to your creditors. Once you have made contact with them directly, you can start the simplest process in debt relief- attempting to negotiate your terms. With an open conversation, you may be able to reduce interest, late fees and penalties and set up a payment plan that works with your income. Your creditors may be more forgiving than you imagine them to be. Be open about your situation, and they may be willing to help you out.
When it comes to the CRA Specifically, you may be able to obtain debt forgiveness, however it will depend on which debt relief program you are using. They will often be willing to work with you directly to negotiate a payment plan- as long as you can stick to it. Additional income that comes through may be held off to pay your debt owed, for example if you receive a tax refund the surplus will go towards the debt owed before you receive the full amount. It is important to know that during your payment plan, you will continue to incur penalties and interest until the amount is paid in full. If you are unable to stick to your payment plan or do not make a plan, they are able to withhold tax credits until the debt is paid. They will also hold the power to garnish your wages or freeze your bank accounts.
You may qualify for tax relief programs, and the CRA may grant you relief from penalties and interest charges. The rules governing this program can be found on the CRA website. It is important to know that you must be able to prove extraordinary circumstances and an inability to pay due to financial hardship, or that the delay was cue to a CRA error and not due to your own situation.
It is important to understand that this program will only provide forgiveness of penalties and interest it will not reduce the debt owed.
Tax Debt Forgiveness or Settlement
As a general rule, CRA will not accept less than the full amount owed when dealing with an individual taxpayer. However there are a few ways to relieve tax debt which include a Consumer Proposal A Consumer Proposal will allow you to include debt from the majority of your creditors, and not just CRA debt.
Put a stop to penalties & interest
Help you with tax garnishment or frozen bank account
Allow you to pay what you can afford and not what your creditors are demanding
Protect your assets
Give you a fresh start
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What do I need to know about CERB
If you are worried about CERB repayment, you are not alone. Many Canadians are citing CERB repayment as the straw that broke the camels back. With the added price of pretty much everything these days, receiving a letter or phone call from the CRA that you need to repay some or even all of the benefits you received can be stressful. Not many Canadians are able to repay a large bill, and many are looking for help on next steps.
The Canada Emergency Response Benefit “CERB” was a government measure intended to provide financial support for Canadian workers who were impacted by the COVID-19 pandemic. This taxable emergency benefit was intended for eligible Canadians to receive $2,000 for each applicable 4-week period. This was later changed that allowed Canadians to be eligible for recovery benefits such as Canada Recovery Benefit and others through Employment Insurance.
The program proved to be confusing to many, and through errors in eligibility to duplicate payments and more, many were determined to be ineligible to receive payment over the payments had been made. Repayment letters are now sourcing many reasons for repayment including:
You applied and it was later determined you weren’t eligible
You earned more income than you anticipated when you received CERB
You received CERB from both EI/Service Canada and CRA for the same eligibility period or received a duplicate payment.
Canada Revenue Agency is collecting CERB overpayment and other COVID-19 benefit debts on behalf of Service Canada. If you received benefits that you were not entitled to, you will be sent a notice of redetermination. If you are unable to pay in full, no interest or penalty will be applied on your COVID-19 benefit overpayment debts if you make a repayment plan with the CRA. A portion of your tax refunds, or other tax credits including GST may be withheld to repay the CERB debt owed. This may include EI benefits which could include up to 50% going towards the debt repayment.
CRA is a powerful creditor who can take extreme steps which as earlier discussed can include, garnished wages, seizures or freezes on bank accounts, seizure of property and more. It is important to reach out to a Licensed Insolvency Trustee to learn more about your debt relief options and for support with any outstanding CRA debt. An LIT will be able to work with you to halt CRA legal proceedings, and get you back on track to financial freedom.
If you find yourself struggling with overwhelming CRA debt Bromwich+Smith has a number of debt relief strategies to help you regain control of your situation. Reach out today and find out if you qualify for debt relief programs. Bromwich+Smith’s Debt Relief Specialists are available by phone at 1.855.884.9243, or request a call back at contact us page.
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FAQ related to Owning to CRA and CERB Debt
1: What are the consequences of owing money to the Canada Revenue Agency (CRA)?
If you owe money to the CRA, they may garnish your income, freeze your bank account, and seize and liquidate your assets in an attempt to collect the debt.
2: How does the CRA initiate legal action for outstanding debts?
Before starting any legal action, the CRA must make three verbal legal warning attempts by phone and then send one written legal warning letter to the debtor.
3: Can I negotiate my debt terms with the CRA?
Yes, once you have direct contact with the CRA, you can attempt to negotiate your terms. Open conversation may lead to reducing interest, late fees, penalties, and setting up a payment plan based on your income.
4: Is debt forgiveness possible for debts owed to the Canada Revenue Agency?
Debt forgiveness from the CRA depends on the specific debt relief program you are using. They may be willing to work with you to negotiate a payment plan, but it is crucial to stick to it. Any additional income, such as tax refunds, may be used to pay off the debt.
5: Can I obtain relief from penalties and interest charges for my tax debt?
It is possible to qualify for tax relief programs that grant relief from penalties and interest charges. However, you need to demonstrate extraordinary circumstances, financial hardship, or a CRA error as the cause of the inability to pay. It's important to note that such programs only forgive penalties and interest, not the actual debt owed.