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Tax debt/fiscal debt

A tax debt or fiscal debt refers to any unpaid amount owed to the Canada Revenue Agency (CRA) and the Revenu Québec (RQ). It’s crucial to pay your taxes on time, as non-compliance can lead to fines and other penalties.

Tax debts can arise for various reasons, such as late payments, inaccurate filings, overestimating deductions or credits, or not remitting sales taxes. If you owe taxes but cannot pay them immediately, it’s essential to contact the CRA and RAQ as soon as possible to avoid additional fees and penalties.

The CRA/RAQ might assist by offering payment options like installment plans or postponing the payment deadline. Moreover, taxpayers may be granted relief from interest and penalties if they can demonstrate that their inability to pay was due to circumstances beyond their control, such as death, severe illness, or financial hardships.

Many people mistakenly believe that unpaid tax debt or unremitted taxes cannot be included in a proposal or bankruptcy. Although tax authorities have several protections and special statuses, their debt can be included and discharged in an insolvency proceeding.

If you cannot come to a satisfactory arrangement, a licensed insolvency trustee can provide assistance. Tax debts are debts that, with few exceptions, can be incorporated into a consumer proposal or bankruptcy.

It should be noted that in the context of bankruptcy, although tax debt can be included, if the debt related to unpaid tax exceeds $200,000 and represents more than 75% of your unsecured debts, you will need to appear in court to obtain a conditional discharge. In such cases, the court will examine the circumstances of your debt and then determine the conditions for a release, which might include an additional amount to pay, an extension of the bankruptcy duration, or both.