What is Income Tax Owing?
Income tax and its significance
Income tax is one of the most important direct taxes imposed by the government of Canada. These taxes are imposed on the income earned by the person or organization. The statistics state that the federal and provincial governments earn much more taxes on personal income
tax than corporate tax.
Canada Revenue Agency
is the nodal federal agency that is responsible for tax collection in almost all provinces except Quebec. The taxpayer must file the returns on his income to the Canadian Revenue Agency. The CRA then analyses the returns and verifies it with all other financial institutes like banks. If there are any changes then the new return is sent to the taxpayer. The taxpayer can appeal against the return by first taking it to the CRA. If not satisfied with the outcome of the appeal then the taxpayer can approach the federal court of appeal.
Outstanding Income Tax Debt
The CRA collects tax on quarterly terms and income tax owing must be paid before that. Any outstanding balances on the account of the taxpayer would attract interest charges for the due pending. The CRA also charges late penalties for late filing of returns also. CRA will impose compound interest on the income tax owing. It will also include any previous dues in the account of the taxpayer. The account interest rate applied varies accordingly for every three months. The dues of previous years will also be taken into account and compound interest will be charged. Income tax must be paid on time and filing of returns must be done properly.
Any discrepancies in the process will attract stringent action on the part of CRA with a number of fines
as well. Not paying Income tax may be considered a crime and the taxpayer may be prosecuted of federal crime. CRA has very great powers and can also access your account to take away funds. They also have the power to seize your assets. They can also exercise control over your salary. The CRA does not need the authorization of a court to exercise such actions against a taxpayer so they are very effective in collecting outstanding income tax.
Negotiating with Canada Revenue Agency
Canada Revenue Agency has a lot of options for people who are in a heap of trouble and have outstanding income tax debt. These taxpayers can negotiate the income tax owing with the CRA. The CRA offers an option to pay the outstanding tax amount in the form of installments. However the penalty charges for late payment and interest charges apply making it more costly. There is also some reprieve for bankruptcy victims as they can file a proposal to CRA. The full outstanding balance need not be paid and taxpayer can pay a lesser amount. CRA assess your profile of returns and payments before accepting the proposal. The proposal must meet stringent conditions in order to be accepted. The CRA will require all information about various assets and liabilities of the taxpayer. Paying income tax regularly and on time is far better than income tax owing. What is Income Tax Owing?