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Is the CRA sending debt letters to you? Are you unsure about what they mean and how to handle them? 

The good news. We have all the information you need to handle a debt letter from the CRA.

The bad news. You’re probably in debt to the government. But we can help you deal with that too. 

Who Is The CRA Sending Debt Letters To?

Generally, the CRA will only send you a debt letter if you owe them money, such as your annual income tax payment. The government of Canada has also been sending debt letters in relation to the CERB benefits

This year the CRA has been issuing a notice of redetermination to Canadians who have received the benefit without being eligible. Thousands of Canadians are being reassessed and may receive a CRA debt collection letter. 

Is The CRA Sending Debt Letters To You: What Can The CRA Do If You Owe Them Money? 

If you’ve received a CRA debt collection letter, don’t panic yet. Many Canadians have this problem and there are several ways to settle your unpaid debts with the CRA

Just keep in mind that tax debt is a serious matter for the CRA, so they have the power to make collection calls and take legal actions to recover what you owe them, including:

  • Freezing your bank accounts
  • Garnishing wages from your paychecks 
  • Seizing your investments
  • Placing liens on your home 

Unlike some smaller-scale creditors, the CRA won’t stop demanding payment from you until you file for a legal debt relief method that offers protection from creditors. None of this is good for your finances or credit, so it’s important to pay your CRA debts on time.   

Is The CRA Sending Debt Letters To You: What Should You Do If You Receive A CRA Debt Letter?

If the CRA is sending you debt letters, don’t wait for the situation to become worse. As mentioned, there are several ways to settle your debt or resolve the issue, including: 

Pay Your Debt, If You Can Afford It

The CRA collects all kinds of debts, like taxes, customs, and GST/HST. The best way to avoid being charged interest on them is to pay it immediately online, in-person or by post. The CRA will then send you confirmation that your payment was received. They will usually only consider it “complete” on the day they get it or a Canadian financial institution processes it.  

Benefits Of Paying Your CRA Debt Immediately

If you repay all of your debt that’s related to the overpayment of government benefits, it may allow you to claim deductions from payments on your T1 income tax return.

What Can You Do If You Think The CRA Has Made A Mistake?

If you think your debt is an error made by the CRA, you can contact them within Canada or the United States at these phone numbers:

  • 1-833-253-7615 (CRA)
  • 1-866-864-5823 (Service Canada)  
  • Weekdays: 7:00am – 8:00pm (EST)

What If You Can’t Afford The Debt?

If your debt letter is not a mistake and you do actually owe the CRA money, there are several alternative solutions that you should start looking into right away, such as:   

Create A Payment Arrangement With The Government 

If you can’t pay your debt off right now or at all, make sure to contact the CRA as soon as possible to discuss a payment solution. Luckily, they can be understanding enough if you’re going through real financial challenges. Depending on your financial situation, they may be able to arrange an affordable payment plan. 

If you can’t make a full payment, speak to a CRA agent for further information. The CRA also offers tools to help taxpayers figure out what they can afford in terms of repayments: 

Get A Personal Loan

If you’re unable to arrange a payment plan with the CRA, your next best option is to take out a loan. With it, you can pay off your CRA debt in one lump sum and then repay your loan in affordable payments over a fixed term. 

A personal loan is a fixed sum of money that you can borrow from lenders in Canada, like banks, credit unions, and alternative companies. Once the funds are deposited into your bank account, you can use them to spread out the cost of your CRA debt by repaying the loan in installments over a set term, with interest and applicable fees. 

Most personal loans range from around $1,000 to $50,000 and have terms of 6 to 60 months. When you apply for a personal loan, approval is based mainly on your:

  • Income
  • Credit score
  • Employment status
  • Other unpaid debts
  • Age and residency details

If you want to qualify for the best personal loan terms and interest rates, you’ll normally need a good to excellent credit score of about 660 to 900. So, before you apply for a personal loan, make sure to check your credit score using a free online platform like CompareHub or for a fee through Canada’s credit bureaus; TransUnion and Equifax.          

File A Consumer Proposal

If your CRA debts are totally out of control, it may be time to consider filing a consumer proposal. A consumer proposal can only be administered by a Licensed Insolvency Trustee but will end any debt collection penalties against you, like wage garnishment, without forcing you to give up any of your assets.

Once you’re under the protection of a consumer proposal, you’ll have to make monthly payments to your trustee, who will send them to your creditors, until your final debt is paid in full. 

Here are some other important things to know about consumer proposals:

  • You’ll have a maximum of 5 years to complete your monthly payments.
  • You can only qualify if you have between $5,000 and $250,000 of consumer debt
  • The process is limited to unsecured debts, including tax debts. 
  • There will be a negative impact on your credit for at least 3 years following the completion of your proposal. 
  • The CRA has a minimum “cents on the dollar” amount they are willing to accept. 

Did You Receive A Debt Letter From The CRA?

If the Canada Revenue Agency is sending debt letters to you, it’s probably because you owe them money or they’ve made a mistake. Before writing any cheques or transferring any money, you should confirm that you actually owe the CRA money. Once you’ve confirmed the debt, make sure you pay it off on time. 

CRA Sending Debt Letters FAQs

How do I stop the CRA from sending me debt letters?

Currently, there are 3 surefire ways to stop the CRA from sending you debt letters:
  • Pay your debt in full
  • File a consumer proposal
  • Declare bankruptcy
Consumer proposals and bankruptcies are the only debt relief methods that lead to an automatic stay of proceedings, which offers total protection from creditors, like the CRA.  

Will I receive a CRA debt letter?

Remember, the CRA will only send you debt letters if you owe them money, whether it’s related to tax debt or programs like the Canada Emergency Response Benefit (CERB) or Canada Recovery Benefit (CRB). For instance, the CRA recently announced that certain CERB or CRB receivers were not entitled to the benefit and that they will reclaim certain payments as a result. So, if you ever get a debt letter for that type of incident, contact the CRA to confirm your eligibility.      

Will I have to pay interest on these CRA debts?

If you receive a debt letter from the CRA but think you may be eligible for a government payment arrangement, don’t hesitate to call them for further details. These kinds of arrangements can offer flexible payment plans with zero interest or penalties applied. 
Bryan Daly avatar on Loans Canada
Bryan Daly

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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