Negotiating A Payment Arrangement With The CRA

A payment arrangement is an informal agreement between you and the CRA to pay off your tax debt over time rather than forcing you to pay the full balance upfront. Typically this looks like monthly payments, giving you time to pay the debt and avoid CRA collection actions that would be detrimental to your business or ability to meet your ongoing expenses.

Before you enter into a payment arrangement with the CRA, make sure you understand and consider the following:

• Ensure your filings are up to date: If you are behind on your tax filings, the CRA may be unwilling to work with you on a payment arrangement. It is important that you and the CRA know the full extent of the tax you owe in order to come up with a realistic plan.
• Be prepared to disclose financial information: The CRA will want you to pay as much as you reasonably can, based on your budget. They may ask for a monthly income and expense breakdown to ensure your proposed payments are fair.
• Be organized before you call: know what you owe (get access to your online account to review Notices of Assessment if needed), have your Social Insurance Number or business number and recent tax documents handy so you can confirm your identity, know what you can afford to offer, and most importantly be in a calm state of mind so that you can conduct the conversation politely.
• Be prepared to be honest and forthright: the CRA has access to a lot of information that other creditors would not, so they may be more able to catch you in untruths. The CRA collection officers are human, and they will be more likely to negotiate reasonably with you if they trust you. If you're not comfortable with what sort of information you should disclose to them, consider consulting a lawyer before you reach out.
• Expect to pay the debt in full, rather quickly: in our experience, the collection agent you are dealing with will expect your proposal to offer full payment of the debt within a relatively short timeframe, as opposed to offering discounts on the debt or entering into long-term payment plans. If this is not possible, see below re: obtaining professional help from a Licensed Insolvency Trustee.
• Accrued interest: Interest will continue to accrue while you are making the payments, so the longer it takes you to pay off the debt, the more you will pay overall.
• No stay of proceedings: Although the CRA will typically refrain from collection actions while you are negotiating a payment arrangement or in the process of making the payments, there is no legal stay of proceedings barring the CRA from those collection actions. Therefore, it is very important that you stay in touch with your collection agent throughout the process to reduce the potential for a surprise change in the CRA’s position.
• Avoid defaults: Once you have agreed to make certain payments, it's important you follow through. If you don’t keep up with the payments or respond to requests for information, the CRA may take collection actions without necessarily giving you further notice. If your situation changes, you should contact the CRA immediately to discuss modifying the plan.
• Keep up with your ongoing tax filings and payments: If your payment arrangement proposal is accepted, the CRA will usually require that you stay current on future tax obligations during the term of the arrangement. Failure to do so could result in collection action being taken even if you are current on the payment plan.

If you have an accountant or other advisor who has better knowledge of your finances than you, consider either formally authorizing them to speak to the CRA on your behalf or asking them to assist you with your discussions with the CRA. This can help you avoid becoming frustrated or agreeing to something unrealistic.

If you can’t afford a reasonable payment plan or are otherwise unable to reach agreement with your collection officer on a payment arrangement, it might be time to speak with a Licensed Insolvency Trustee (LIT). Tax debts can be included in a Consumer Proposal, a formal payment arrangement that can be more effective than a payment arrangement. This is because a Consumer Proposal provides a legal stay of proceedings stopping CRA from collection actions, it stops interest accruing, and it allows you to access a different branch of the CRA – one that is authorized to accept less than full payment and/or payments over a longer timeframe, when the situation warrants it.

Charla Smith & Company is a Calgary-based Licensed Insolvency Trustee, serving the Alberta region. We regularly help individuals consider their options for dealing with overwhelming tax debt. If you'd like to explore these options, please reach out to us.

Disclaimer: This publication provides general information and should be seen as broad guidance only. The information contained herein cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon this information without obtaining specific professional advice relating to your particular circumstances. Charla Smith & Company Ltd. does not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.