Our Experts Explain What CRA Looks for in a Consumer Proposal
If you owe a tax debt to the Canada Revenue Agency (CRA) and you’re unable to pay this debt, you may be eligible to file a consumer proposal. While credit card companies and banks almost always accept a reasonable offer, CRA is only likely to accept if the proposal meets certain conditions. That’s why it’s crucial to plan your consumer proposal carefully when CRA is involved.
Settling tax debts with the Canada Revenue Agency may sound overwhelming, but fortunately, you don’t have to go it alone. The team at J. Bottom & Associates Ltd. can help you navigate the consumer proposal process for much-needed debt relief. With more than 55 years of combined experience, our financial trustees are equipped to provide simple, accurate, and actionable solutions to help you overcome your financial challenges. Call us today for more information.
Why is CRA More Difficult to Work with Than Other Creditors?
As a government agency that effectively serves as a creditor for every tax-paying Canadian, CRA is much stricter than the average lender. After all, the agency never granted you credit. It isn’t as though you applied for a loan at a bank, and the company approved. Rather, you didn’t pay your taxes, and now you owe CRA money. That’s why this agency is never happy about being a creditor in a consumer proposal.
What Conditions Does CRA Look for?
Here are some criteria a consumer proposal should meet to satisfy CRA:
- Offer more money than filing for bankruptcy would grant: Including a bankruptcy comparison in the consumer proposal shows how much CRA could expect to recover if you sought bankruptcy consolidation This makes the proposed payment more appealing.
- Meet minimum return requirements: CRA won’t accept a 90 percent loss, even if it’s more than bankruptcy would provide. Still, you may be able to cut your tax debt by 50 to 70 percent, depending on your income and how much you owe in back taxes, interest, and fees.
- Show that you can repay the proposal: A successful debtor needs an affordable and reasonable repayment plan. The offer should demonstrate how the debtor plans to keep up with monthly payments.
- Be up-to-date on all tax returns: If you are behind on your most recent tax filings, you must catch up for CRA to determine the precise amount you owe. Only then do you have any chance of the agency voting in favour of accepting your proposal.
- Promise to file all future tax returns on time: It’s wise to include a clause demonstrating your commitment to keeping up with your tax filings from here on out. Failure to file on time in the next few years could allow CRA to kill the proposal.
- Make more frequent remittance payments: Perhaps you’re a quarterly remitter, meaning you make tax payments every three months rather than having taxes withheld from each paycheck. CRA will be much happier if you agree to pay more frequent installments, such as monthly or semi-monthly.
- Show that you have an accountant: If filing taxes has been a consistent problem for you, including information about the accounting help you’re getting now could go a long way.
What Happens When CRA is One of Several Creditors?
When you file a consumer proposal, the Office of the Superintendent of Bankruptcy sends the offer to all your creditors, giving them 45 days to decide if they accept or reject the proposal. All creditors will vote, and the majority opinion (determined by overall dollars owed) determines whether the offer is ultimately accepted or not.
If CRA is only one of many creditors, the agency can’t reject the proposal by itself—unless it represents the majority of the total debt you owe. CRA can certainly downvote the offer, but if most of your creditors think it’s reasonable, it will still succeed.
Let Our Financial Experts Help You File a Consumer Proposal
It’s entirely possible to file a successful consumer proposal with the Canada Revenue Agency—you simply need to make a reasonable offer and get caught up on your taxes. For help, turn to J. Bottom & Associates Ltd. We’re a Licensed Insolvency Trustee with offices in New Westminster, North Vancouver, and Port Coquitlam. Our team would be happy to answer your consumer proposal questions and help you make the best possible offer to CRA and your other creditors. To begin breaking the cycle of debt, please contact us and request a free consultation today.