How To Pay CRA Taxes
If you are self employed chances are at one time or another you have been late or missed paying your taxes.
CRA has strong powers enabling them to collect missed taxes. CRA can withhold child tax credits, GST credit take money from bank accounts or pay cheques as well you will be charged interest on the taxes you have outstanding.
How to Prepare
To prepare start by knowing what you owe, submit all outstanding tax returns to CRA. Obtain professional assistance from an accountant or tax preparation service.
What if You Can’t Pay All At Once
If you can’t pay your CRA bill in one lump sum you may be able to apply for a negotiated payment schedule. This schedule is usually a length of one year. You will be required to pay interest on the Tax arrears until taxes are completely paid off. A CRA office near you will be able to provide you details on how to get this done.
What Next If You Can’t Pay CRA Debt Off
If CRA Does Not Accept Your Offer you will likely have to look at other options. One common options is if you own a home with home equity you can obtaining a 2nd mortgage or a home equity loan to payout CRA in one lump sum. Keep in mind a HELOC through your bank is likely not an option due to banks commonly do not allow the payout of income taxes in a refinance or equity takeout.
How to Avoid History Repeating itself with Tax Debt
To help avoid accumulating to much tax debt have a plan. Try putting away a monthly amount for taxes.
Try to guess what your annual income will be. Then look at a Marginal Tax Rate Grid for BC & Federal Taxes. Here is a Link to TaxTips.ca there you will find a rate per income threshold. Use this information to make predictions on how much tax you will owe based on each income threshold you surpass.
CRA requires quarterly payments on income taxes so by following this grid it can assist you with making those CRA tax instulments.
