One huge myth is that an income tax problem disappears after seven years. Income tax problems and debt do not disappear after seven years. What is true is that if you approaching the seventh anniversary of a tax debt or tax problem, the Canada Revenue Agency will apply incredible pressure to get you to deal with it.

Canada's Auditor General does not gauge the Canada Revenue Agency's results/efficiency by dollars collected; it is gauged by the number of files closed. While at the end of seven years, the Canada Revenue Agency must report how many files they have not closed and effectively write them off when reporting to the Auditor General. It does not mean they will stop trying to collect the money.

There have been cases where an individual has never filed a tax return in their life and then proceeded to declare seven years' worth of income to the Canada Revenue Agency. Upon observing that the individual had more than seven years of past due returns, the Canada Revenue Agency demanded that they file ALL of their entire past due tax returns.

The Canada Revenue Agency wants to see your file closed by the seventh year to show more closed files to the Auditor General so around the fourth or fifth year that your tax debt is outstanding; they will begin aggressively trying to collect from you. This is to push you to pay off the tax debt so that they can close your file or force you into bankruptcy resulting in the close of your file.

If you are behind filing your income tax returns, do not wait until the Canada Revenue Agency comes after you. If they are unaware of your tax debt, you may be eligible to make an application for tax amnesty under the Voluntary Disclosure Program. If accepted you can avoid interest and penalties on your tax debt altogether.

If the Canada Revenue Agency is already after you to file your past due income tax returns, ignoring the problem will not make it go way. The Canada Revenue Agency can deploy any number of actions to force you to pay. They could at any time file a notional assessment, which is effectively filing your tax return on your behalf based on what they estimate your tax debt to be. They can then proceed to collect the money through any number of measures that could include freezing your bank account or garnishing your wages.

If you have already been notionally assessed, this can be corrected. Working with an organization that is experienced at helping people who have tax problems, you can re-file your returns with your accurate income and expenses and you may end up owing less money.

Whether you voluntarily file your income tax returns or not you will be subject to interest and penalties that will increase the size of your tax debt. Once your income tax returns are filed and the amount of your tax debt is determined, your next step will be to arrange a payment plan at terms you can live with. Do not even consider attempting to negotiate with the Canada Revenue Agency on your own, this could have devastating consequences and you must remember that it is their mandate to collect the money from you. They are not your friend and could ruin your life if given the opportunity. If you are behind filing your returns, there is help out there offered by companies who are skilled at negotiating with the Canada Revenue Agency.