How To Negotiate A Payment Schedule With CRA

Kelowna AccountantKelowna accountant Ken Davidson talks about negotiating payment schedules with the CRA. Is it possible? Find out below.

Have you been audited recently and have a hefty tax bill to pay? Or maybe you didn’t put enough money aside to pay your year end taxes. Either way, many people wonder how much room there is with Revenue Canada (CRA) to negotiate a payment plan.

If you do not have all the money available to pay your tax bill here’s what to do:

  1. Wait for your notice of assessment to arrive in the mail
  2. The minute you receive your notice of assessment call Revenue Canada’s collection department and suggest a payment plan to pay off your outstanding tax bill, then stick to the plan

Be proactive. Part of the problem is people who get behind in their bills have the tendency to be the type that sit back and let things happen to them. I think a lot of people would be much better off if they were proactive about their situation.

If you get a $10,000 tax bill that you can’t pay for whatever reason, pick up the phone and call CRA’s collection department. At that point in time, your account may not have been assigned to anyone but they will still put a note that you called.

Related: Do You Need An Accountant During An Audit?

When a Revenue Canada collection agent calls you, you can find out who the person is that’s been assigned to your account. At that point, you should aim to create a relationship with that person, as they will be handling the process of your audit and the collection of outstanding taxes on your account.

Kelowna AccountantNever Make This Mistake

Whatever you do, you should never tell Revenue Canada something you are unable to do. If you promise them that you’re going to give them 5 payments of $2,000 to pay off your tax bill, don’t miss one of those payments. They will take immediate action against you, such as freezing your bank account.

If you can’t do something, don’t tell them you’re going to. That is simply the wrong approach in every possible way, so always tell the truth and aim to work it out with them.

Generally, they want payroll taxes and HST immediately. There is very little flexibility in payroll tax remittance and HST tax remittance and the reason for that is simple: it’s not your money. It never was your money, you are simply a collection agent for Revenue Canada. It’s extremely important that you never use the money set aside for these taxes for any reason because if you use that, you are using trust money and Revenue Canada does not like that. Personally, I agree with them on this point, as that’s the wrong way to run a business.

Bottom line: There is very little (if any) negotiation when dealing with trust money, aka payroll and HST taxes. Don’t spend it!

Negotiating Personal & Corporate Taxes

When it comes to these circumstances, I have personally found the collections people at Revenue Canada to be fantastic throughout my entire career spent as a Kelowna accountant.

If you can come up with a reasonable payment plan that gets them their money within six months, they are generally quite patient. If you plan on going longer than six months, there should be some very good reasons and a lot more communication with the collections person.

Collections people have enough power to seize bank accounts without going to court, so if you don’t do something that you say you’re going to do, it could have dire consequences. Revenue Canada’s collection agents have a lot more power than any other collections agent you’ve dealt with.

An Important Note For Corporate Directors

If you have a corporation and you’re a director of that corporation, even if you aren’t active within it, you can personally be held liable for the payroll and HST trust money. If you’re not doing your job as a director and ensuring that that tax money is being remitted then you could be on the hook for it.

If you’re the director of a certain company, active or not active, you should be following up occasionally to ensure those taxes are being paid appropriately and on time. If somebody is negotiating with Revenue Canada on payment terms, you should understand those terms and make sure that they are being followed through as you don’t want to be held liable for unpaid taxes in a corporation.

Related: How To Stop Yourself From Getting Nailed With A Big Tax Bill

Got a question that you’d like to see answered in a blog? Leave a message in the comments below and Kelowna accountant Ken Davidson will consider it for a future blog post!


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