Patrick works part-time in an electronics store and also carries out IT jobs as a self-employed person. Higher taxes than expected and outstanding amounts with the tax office are the last straw.
Patrick received a tax assessment from Revenu Québec claiming a tax amount of $15,000, which includes an amount higher than the amount he estimated for 2022, but also includes unpaid balances for the 2020 and 2021 tax years. His accountant estimates that the Canada Revenue Agency (CRA) also requires an additional $10,000. “My employer deducts little withholding tax from my salary because I only work 20 hours a week for him. For my IT support contracts, I reported revenue of $60,000 in 2022. However, certain expenses were rejected by Revenu Québec and the contribution was much higher than expected,” explains Patrick.
He also has a $23,000 balance on his credit cards and his only possession is a fully paid-for $8,000 Mazda 5 that he uses to drive to his clients’ homes.
A very real threat
Unable to pay the amount requested by Revenu Québec, Patrick contacted them to reach an agreement. The agent demanded a refund of $700 per month from him, but he was unable to pay it. “My problem is that my income from self-employment is very irregular. “Also, sometimes I have difficulty getting paid by my clients and am therefore unable to make such a commitment,” Patrick laments.
Result: Interest is piling up on his tax debt and he is now threatened with the seizure of his car and his salary. In a panic, he turned to the licensed insolvency firm Jean Fortin et Associés in the hope of finding a solution.
Seizure of property, accounts and salary
Pierre Fortin, licensed insolvency practitioner and president of Jean Fortin et Associés, was reassuring from the start. “People mistakenly believe that tax debts cannot be included in a consumer proposal or bankruptcy. With rare exceptions such as fraud, this is still possible for amounts owed to the tax authorities, both in terms of personal and business tax,” he explains.
However, he adds that we must be proactive because Revenu Québec and the CRA have all the power to act very quickly and seize property, bank accounts and wages. In addition, there are penalties and interest that increase the bill.
A way out
First, Jean Fortin’s advisor told Patrick that he had the right to challenge the new tax assessment. However, he will need to consult an accountant or a lawyer to ensure he has good arguments, and the process can be lengthy with no certainty of outcome.
Since there is no reason to object to the tax assessment or reach a reasonable settlement, the best solution in his case is to file a consumer proposal for $500 for 60 months, a total of $30,000 of the $48,000 owed to him US dollar credit cards and taxes. It also drops his monthly payments from $2,000 to $500, a nice boost that allows him to regain control of his budget. “He should also take the opportunity to develop good savings habits and save for his taxes next year. It would also be in his interest to clarify with his accountant what installment payments would be required next year in order to avoid getting into such a situation in the future,” mentions Pierre Fortin.
ADVICE:
- If you receive a tax notice from the tax office that requires a higher amount than expected, prepare a cost estimate to determine your ability to pay. Then contact the Revenu Québec and CRA representative to explain your financial situation and try to find a refund arrangement.
- It is possible to appeal a decision. These steps must be completed within 90 days of the contribution date. For more information, visit the Revenu Québec and CRA websites.
- If you work two jobs at the same time, one as an employee and the other as a self-employed person, you must be aware that additional taxes apply to the latter. Do a tax calculation with your accountant and set aside money in a bank account to estimate what you will have to pay on your next tax return.