Tax Debt Help & Advice

Taxes are deductions taken from your income by the government and are put towards a number of programs such as pension, public healthcare and policing. Taxes are split between the Federal and Provincial governments


Taxes are something most people can’t avoid, up to 42% of Canadians income is paid towards different taxes. As it works on a progressive system, the more money you earn, the more you pay in taxes. However, everyone pays the same rate of tax until they reach the limit of each tax bracket.

For example, say a tax system has two tax brackets dependent on earnings. The lower bracket applies to income of $0 – $60,000 with a rate of 10% and the higher bracket applies to any income higher than $60,000 with a rate of 25%. Thus:

  • If someone earns $50,000, 10% of this would be $5,000
    • This is simple, and easy to calculate
  • If someone earns $90,000, the tax would be a combination of the lower tax bracket and the percentage of the higher tax bracket, however the higher tax bracket would only apply to income above the lower one.
    • So, this would be ($60,000 x 10%) + ($30,000 x 25%) which would work out as $13,500 payable in tax

This, understandably, can become confusing, especially since there are various taxes to be accounted for and one wrong calculation could result in you paying the wrong amount. The math itself is not complicated, but multiple sums that are simple in nature are often easy to mix up.

According to Statistics Canada, over 2.1 million people are self-employed in Canada, so a large portion of the population regularly have to calculate their own taxes and declare this to the Government.

Thankfully, there are numerous websites that offer tax calculators for you and accountants who will manage your finances for you.


42% of Canadians income is paid towards different taxes

How Tax Debt Can Affect Your Life

Taxes are a priority bill, and not paying them can often result in severe consequences. As such, this can impact on a person’s life in multiple ways.

Personal Finances

Not paying your taxes or filing a tax return before the end of the financial year will result in not only interest being added to your bill, but you will also be charged a penalty fee. Given that the charge is 5% of the amount owing and 1% for each month that you are late.

The Canada Revenue Agency (CRA) can also seize your pay either in part or in full and can even seize your property until the debt is paid. Having income seized leaves people with less money to pay their bills so will often leave people no choice but to take out further credit to help either pay their tax debt or to cover them until they can arrange payment.

Mental Health

Much like other debts, the stress of paying your taxes will weigh on people’s minds. Taxes are one of the most important bills to pay and with consequences that can affect your finances so highly this can often be linked to anxiety and depression. According to the Canadian Mental Health Association (CMHA), 1 in 5 Canadians will experience a mental health problem or illness in any given year and approximately 5% of the household population are affected by anxiety disorders.


Financial struggles/worries are a topic that is often kept private by most people, many of us are brought up being told that talking about your money is ungracious and should be known only by you and the people you owe money to. With the exception of an accountant, most will not discuss their taxes openly which can affect your personal relationships. On top of the financial consequences, the CRA can also arrest you for unpaid taxes, so the potential for jail time is not something you want anyone to know. A survey carried out by credit agency Equifax found that 23% of people will hide debts from their partner which creates a large potential for conflict to arise between partners. This becomes even more of an issue for couples who may choose to file a ‘coupled’ tax return as they could potentially miss out on the benefits of this if debts are being hidden.

Warning Signs

If you owe money to your taxes, the CRA will make sure you know. The below signs, however, are things you should be on the lookout for:

  • You are receiving repeat demand notices to pay your outstanding bill
  • Your income has been garnished or seized
  • You receive a letter stating the CRA are going to put a lien on your property or seize it
  • Experiencing stress or anxiety over how you are going to pay your taxes
  • Avoiding the topic with others

Taxes aren’t a common topic between friends, unless you are complaining about the amounts, but there are warning signs that you may notice if someone you know is in debt to their taxes:

  • They express signs of stress or irritation when the topic is brought up
  • Not discussing their finances openly (if they usually discuss this willingly)
  • Hiding certain letters (if you live with someone)

If you are not confident on what to do next, there are advisors within financial firms that may be able to offer you advice on how to get back on track financially.

How to get help

Everyone’s situation is different, and most will have legitimate reasons for falling into debt with their taxes. However, much like an elephant, the government won’t forget that you owe a debt and doing nothing isn’t really an option. Below are some measures you can use to help you get back on track.

Speak Up – It isn’t always easy to see the support network around you, sometimes just talking to someone you trust can help you to discover the help you maybe didn’t know you could have.

Sound Advice – Contact the CRA, they will have options to help you set yourself back on the right path with your taxes. If the debt is high, it may also be an option to contact a tax accountant or tax lawyer.

Here to Help – Taxes can be scary and confusing, but at Money Advice Canada our experts are not here to judge. We can offer you immediate free and confidential advice to help you find the best solution for you.

Warning Signs

Not paying your taxes or filing a tax return before the end of the financial year will result in not only interest being added to your bill, but you will also be charged a penalty fee.

How we can help you with your debt?

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