Income taxes are a significant financial responsibility. Every year, everyone submits their taxes. Some people get tax returns, and some are reimbursed. You will also have to pay sales and business taxes if you run a business. We all have to deal with tax debt at some point, regardless of our circumstances. You might be pondering how tax debt affects your credit score or credit report in light of this. In general, debt to the CRA has no impact on your credit rating or record. But if the CRA has issues getting you to pay your tax debt, they may take drastic actions. This activity could have negative effects on your credit score. Let’s take a deeper look below.

Will my credit score be impacted if I owe the CRA taxes?

A privacy policy is in effect at the CRA. It limits the knowledge they can divulge to other organizations. This implies that the Canadian credit bureaus Equifax and TransUnion cannot receive personal tax information about you from the CRA.

However, this does not mean that tax debt cannot show up on your credit report. A formal court action may be initiated if tax issues get out of hand. Your financial debt would then become public knowledge. In Canada, public record information is gathered by the credit bureau and reported on. The CRA also has the power to report a tax lien on your credit report.

Tax return submissions, CRA payments, and other filings and payments have no impact on your credit score. The CRA is not authorized to give the credit bureau information about payment records, balances, and other things. Your credit score won’t likely be impacted if you pay taxes late, accrue interest and penalties, or owe a minor tax debt. Small tax disputes are typically promptly resolved by the taxpayer and the CRA. As a general guideline, take care of any tax-related issues as soon as you can. That will stop the problem from worsening and possibly affecting your credit score.

What to Do If You Owe Taxes

Don’t get too worked up if you owe money to the CRA. Set up a plan to see if you have enough money to pay your taxes. If you are unable to, you still have a few options.

Payment Plan

You can work out a payment plan with the CRA if you’re unable to settle your entire tax bill right away. You pay back your complete bill in a series of smaller installments, plus interest.

Filing for Taxpayer Relief

The CRA may be able to provide taxpayer relief in your situation. Although you won’t be assessed interest or fines, you will still be required to repay your tax debt.

Initiative for Open Disclosure

Do you owe money in taxes as a result of failing to submit a prior tax return or filing it incorrectly? In that case, you might be eligible for a voluntary disclosure program. This is a second opportunity to file a correct return. Likewise, this option can reduce some fines and interest.

Options for Financing

If you’re not eligible for taxpayer relief, you can use a personal loan or other financing alternatives to pay your taxes. Even though you are trying to avoid interest and penalties, you will incur high-interest debt by using a credit card to sort tax bills.

Consultation with a Debt Help Expert

You can always turn to a debt relief expert for assistance if you feel overwhelmed with debt. You can apply for a consumer proposal or file for bankruptcy. Although making a consumer proposal or declaring bankruptcy will have a temporary impact on your credit report, these options are your best bet if you owe too much in taxes or other debts that you are unable to pay back. The majority of tax obligations, including income tax, HST, and payroll withholding taxes, will be discharged by bankruptcy and consumer proposals. If you owe a lot of money in taxes, consult a debt expert before the CRA takes legal action against you or claims your property.

If You Have Tax Debt, We Can Assist You

If you have tax debt or any other unsecured debt, and need the assistance of a debt expert to help you manage your debt, or if you are overwhelmed with debt and interest charges you should talk with one of our debt experts at EmpireOne Credit, and have financial freedom. All interest on your unsecured debts will stop instantly, and your debts could be reduced by up to 80%.

Call (416) 900-2324 to schedule a free, confidential appointment with us.