Guest post by Borrowell
The tax filing date this year for most Canadians is April 30th, 2019 and that date is coming up fast. The self-employed deadline is June 15, 2019 (but any balances owing have to be paid by April 30th, 2019). These dates are incredibly important because as a Canadian, you must pay your taxes. But we didn’t need to tell you that.
The interest the Canadian Revenue Agency (CRA) charges is just the beginning. There are a few different situations that could have led to you not being able to pay your taxes, and we get it – life happens. But the important thing is to deal with your situation right away.
The CRA’s collections department has a lot of power. They can freeze and seize your bank account and order wage garnishments. They can even issue a lien against your property – yikes! Let’s dig into what can happen if you don’t pay your taxes on time.
What happens if I can’t pay the CRA by this year’s deadline?
Two different but equally bad things can happen. You’ll be charged interest and late penalties, both of which are no joke when dealing with the CRA.
If you have a balance owing from the previous year, the CRA charges compound daily interest on your balance.
As for late penalties, if you file your tax return after the due date and you owe money on that return, the CRA will charge you a late-filing penalty of 5% of your total balance owing, which grows by 1% every month your return is late (to a maximum of 12 months).
Have you been assessed for previous late-filing penalties? Your penalty could double to 10%, plus 2% of your balance owing for each full month your return is late. For more information on late fees and penalties, visit the CRA’s website.
What can I do to avoid being late to pay my taxes?
A low-interest personal loan is an option if you know you’re going to be late to pay the government your taxes.
Why take out a personal loan?
Taking out a personal loan is a big decision if you’re worried about cutting it a little too close with the CRA this tax season.
An affordable personal loan offers:
- Favourable terms
Be sure to shop around to find the best personal loan with the best possible loan terms. This means a low-interest rate and flexible repayment options.
The interest rate you receive will be one of the main deciding factors when you choose your loan. Luckily, Borrowell personal loans start at 5.99%* APR – which is more favourable than borrowing against a credit card or with one of the CRA’s repayment plans (but more on that later). If you qualify, you’ll be offered a 3-year or 5-year option.
- The amount you’re looking to borrow
If you’re paying off your taxes with a personal loan, it’s critical to find a loan that covers the amount you owe the CRA. But you also don’t want to risk taking on too much debt. Borrowell offers personal loans of up to $35,000, which should hopefully be enough to pay down your tax debt.
- No hidden fees!
If you come into some money and want to pay off your loan early, some lenders won’t charge you any repayment fees. While this might seem small, this perk can make all the difference when trying to pay back debt as quickly as you can.
Other ways to pay off your taxes
- Choosing a CRA repayment plan
As we mentioned above, the CRA will allow you to pay back your taxes owing via a repayment plan, but be careful and weigh your options. It doesn’t come without strings.
In order to be accepted for this plan, you have to give the CRA full disclosure about your finances. Then you get to repay your debt, with interest still being charged and you must remain current and pay all future taxes owing as well. When you take into account the high rate of interest that the CRA charge, it can be an uncertain method.
- Borrowing with a credit card
Credit cards are a great tool to access credit but should not be used to borrow with. This method to pay off your taxes is strongly advised against because of the high-interest rates on credit cards, which usually fall anywhere between 19.99%-29.99% to put things into perspective.
These kinds of interest rates are typically a lot higher than those of the CRA or from most lenders. This could also negatively affect your credit score because of your credit utilization ratio, which is how much credit you’re using out of the total amount available to you.
The last word
There are a few options for you to consider, but the most important thing is that you find a way to pay the CRA as quickly as possible. As always, weigh all of your options and choose the plan your comfortable with.
If you’re looking to pay off taxes with an affordable loan, check your rate with Borrowell to see what you could qualify for. Check My Rate!
*Please note that final approval of your application for a Borrowell loan is conditional on completion of the steps set out in your application (including identity, income, and bank account verification) as well any further underwriting review deemed necessary. Additional documents may be required. Borrowell retains the right to adjust any loan options presented to you or to decline your application at any time prior to final approval.
Information provided is for educational purposes only and should not be taken as legal, tax or accounting advice. Nest Wealth recommends readers consult with their own accountants and/or other professionals for advice on their specific tax circumstances before taking action.