Being in debt to the Canada Revenue Agency can be paralyzing. The very thought of facing aggressive CRA agents is terrifying.
If you owe money to the CRA it will not go away by itself. Also in many cases, taxpayers who have been assessed with a tax debt, become fearful to file future returns. Even if you have not yet filed returns to the CRA, they can notionally assess you and make an arbitrary determination of your earnings based on whatever records they have on file.
If the CRA believes you owe them money, they will come after you. Interest and penalties will accrue at an alarming rate and your tax debt could grow in size by 200-300 percent.
If you own your home, you stand to lose the most. The CRA can attach a lien to your home which could cause a number of problems;
- The bank could call in your mortgage or refuse to renew your mortgage.
- When the amount of the lien exceeds the equity in your home, it makes it impossible to sell or refinance to deal with the tax debt.
- The CRA could force you into power of sale.
Before a lien is registered a homeowner has more options;
- If the amount of the debt exceeds the amount of equity available in the home, the homeowner could refinance the home. At which point they could use whatever equity is available to bargain with the CRA and offer a lump sum payment along with a monthly repayment plan.
- If the amount of equity does not exceed the available equity in the home and there is no lien present, the homeowner has many options. A seasoned mortgage broker could arrange a new first mortgage or a second mortgage to pay off the tax debt.
- If the amount of equity does not exceed the available equity but a tax lien is registered on the home, this represents a more delicate situation. Even if the tax debt is being paid in full some banks will cringe at the mere existence of a tax debt. There are however many major financial institutions that will gladly offer low interest mortgage financing to a homeowner who has a tax debt provided the tax debt is being paid in full.
At the end of the day trying to ignore a tax problem is an expensive proposition and will cost you way more in the long run. Your best course of action is to hire someone who is capable of dealing with the CRA on your behalf. If you are a homeowner there are many mortgage brokers who represent all major financial institutions and specialize in working with homeowners who have tax debt.
If you have no assets and have obtained large tax debts there are also financial professionals who can advise you on debt relief options so that you can move on from your tax debt. For more information about paying your tax debt using home equity please visit http://www.gtamortgagematters.com/