Running a business comes with its share of financial ups and downs, and sometimes, paying your corporate taxes in full by the deadline isn’t possible. If that’s the case, the Canada Revenue Agency (CRA) offers payment arrangements to help you stay compliant while managing cash flow. Let’s explore how you can negotiate a favorable payment plan with the CRA and avoid unnecessary penalties or interest.
What Is a CRA Payment Plan?
A CRA payment plan, also known as a payment arrangement, allows businesses to pay off their tax debts over time rather than in a lump sum. This can help reduce the immediate financial strain on your business while ensuring that you meet your tax obligations.
The CRA typically charges interest on the outstanding balance, so it’s important to negotiate terms that work best for your financial situation.
When Should You Consider a Payment Plan?
A payment plan is a good option if:
- You’re unable to pay the full amount of taxes owed by the due date.
- You want to avoid enforcement actions, such as garnishments or liens, that could disrupt your business operations.
- Your business is facing temporary cash flow challenges but can commit to regular payments over time.
Proactively contacting the CRA as soon as you realize you can’t pay in full shows good faith and can improve your chances of negotiating favorable terms.
How to Request a CRA Payment Plan
Follow these steps to request a payment plan for your corporation:
Step 1: Assess Your Financial Situation
Before contacting the CRA, take a detailed look at your business finances. Determine:
- The total amount of tax owed (including any penalties or interest).
- How much your business can realistically afford to pay each month.
- When you expect your cash flow to stabilize or improve.
Being prepared with these details will show the CRA that you’ve thought through your repayment plan and are serious about resolving the debt.
Step 2: Contact the CRA
Call the CRA’s debt management team at 1-800-959-5525 (for businesses) to discuss your situation. You’ll need your Business Number (BN) and tax account details handy.
Explain your financial challenges and propose a repayment schedule based on what your business can afford. Be honest and realistic—offering a plan that you can’t stick to will only create more stress later.
Step 3: Provide Supporting Documentation
The CRA may ask for additional documents to assess your financial position, such as:
- Recent financial statements (profit and loss, balance sheet, etc.).
- Bank statements for your business accounts.
- Cash flow projections.
Providing these documents promptly can speed up the approval process and improve your chances of securing a reasonable payment plan.
Step 4: Negotiate the Terms
The CRA will evaluate your proposal and may counter with different terms. Be prepared to discuss:
- The length of the repayment period.
- The amount and frequency of payments (weekly, biweekly, or monthly).
- The interest rate applied to the outstanding balance.
If the proposed payments are still too high for your business, don’t hesitate to explain your concerns and work towards a mutually acceptable solution.
Tips for Securing a Favorable Payment Plan
Here are some strategies to help you get the best possible terms:
- Be Proactive: Contact the CRA as soon as you realize you can’t pay in full. Waiting until after the deadline can make negotiations more difficult.
- Show Good Faith: If possible, make a partial payment upfront to demonstrate your commitment to resolving the debt.
- Communicate Clearly: Be honest about your financial challenges and provide accurate information about your ability to pay.
- Stick to the Plan: Once your payment arrangement is approved, make every effort to follow it. Missing payments could lead to enforcement actions.
What Happens If You Don’t Arrange a Payment Plan?
If you don’t contact the CRA to make arrangements, they may take enforcement actions to collect the debt, including:
- Garnishing your business’s bank accounts or accounts receivable.
- Registering a lien against your business assets.
- Issuing a legal warning or initiating court action.
Negotiating a payment plan not only helps you avoid these measures but also keeps your business in good standing with the CRA.
Final Thoughts
Negotiating a CRA payment plan can give your business the breathing room it needs to recover financially while meeting your tax obligations. The key is to act early, be transparent about your situation, and commit to a realistic repayment schedule.
Need help navigating CRA payment arrangements or managing your corporate taxes? Contact us today for expert advice and tailored support.
