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Category: 2018 Tax Deadline

  • April Showers Bring May CRA Tax Debt… April 30 is the Income Tax Deadline

    The 2018 Canadian income tax deadline is almost here. On April 30, 2019, all personal taxes must be filed for the 2018 tax year. If you miss this deadline, you will officially be a late filer in the eyes of the Canada Revenue Agency (CRA).

    When you file taxes late, and you owe a balance, not only will you still have to pay the principal tax debt, but you’ll also have to cover interest and penalties. These additional costs can add up quickly.

    In 2019, here’s what you could end up owing:

    Interest

    • The CRA charges compound daily interest starting May 1, 2019, on any unpaid amounts owing for 2018. This includes any balance owing if the CRA reassesses your return. In addition, the CRA will charge you interest on the penalties starting the day after your filing due date. The rate of interest the CRA charges can change every three months.
    • If you have amounts owing from previous years, the CRA will continue to charge compound daily interest on those amounts. Payments you make are first applied to amounts owing from previous years.

    Late-Filing Penalty

    • If you owe tax for 2018 and you file your return for 2018 after the due date of April 30, 2019, the CRA will charge you a late-filing penalty of 5% of your 2018 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
    • If the CRA charged a late-filing penalty on your return for 2015, 2016, or 2017, your late-filing penalty for 2018 may be 10% of your 2018 balance owing, plus 2% of your 2018 balance owing for each full month your return is late, to a maximum of 20 months.

    Repeated Failure to Report Income Penalty

    • If you failed to report an amount on your return for 2018 and you also failed to report an amount on your return for 2015, 2016, or 2017, you may have to pay a federal and provincial or territorial repeated failure to report income penalty.
    • If you did not report an amount of income of $500 or more for a tax year, it will be considered a failure to report income.
    • The federal and provincial or territorial penalties are each equal to the lesser of:

                 – 10% of the amount you failed to report on your return for 2018;  

                 – 50% of the difference between the understated tax (and/or  overstated credits) related to the amount you failed to report and the amount of tax withheld related to the amount you failed to report.

    If you owe a tax debt that you won’t be able to pay, the right answer is to file anyway.

    Once you are filed and have your assessment, you’ll need to deal with the tax debt. This is also best to do before the April 30, 2019 deadline.

    If you can’t pay, get in contact with a debt consultant that has a CRA-specific program. For example, at DebtCare Canada, we have access to one of the only programs in Canada that can resolve a CRA back tax problem. We also have other financial solutions, like debt consolidation, home equity financing, and insolvency filing options.

    It can’t be reiterated enough — do not miss the Canadian tax deadline.

    For a refresher, here are the 2019 filing dates:

    • April 30, 2019: filing deadline for personal income tax.
    • June 17, 2019: self-employed or sole proprietor tax filing deadline.*

    *A note for those who are self-employed: while technically the filing due date for sole proprietors isn’t until June 17, the CRA will begin charging interest on any amounts owing on May 1, 2019. Therefore, it is also in your best interest to file before April 30, 2019.

    Have questions about filing or dealing with a tax debt? DebtCare Canada is here to help.

    Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.

  • Liberty Tax Filers – What to Do if You Will Have a Tax Debt You Can’t Pay?

    It’s income tax season and many Canadian filers may be turning to online tax preparation services, like Liberty Tax.

    These services are great options for submitting your income tax return, and for finding more deductions and rebates you may not have known about. But what happens if you’re assessed with a tax debt that you can’t afford to pay?

    Online tax preparation services like Liberty help you file your taxes – but they don’t help you avoid CRA collections.

    If you owe a tax debt that you can’t pay, either through filing with an online tax service or with an accountant, here are some best practices to keep in mind:

    1. File even if you can’t pay.

    If you know you will owe a tax debt, file anyway before the income tax deadline of April 30. Not filing will only makes things worse.

    If you don’t file, you can be assessed with failure to file penalties, and even be charged with tax evasion.

    It’s better to get your return in and look into options for how to clear the tax debt, instead of just letting it fester.

    2. Seek outside tax help.

    While online tax services like Liberty are good tools for filing your return, they are not debt consultants. Case in point: at our last check, Liberty Tax Canada didn’t appear to have a dedicated resource page about owing a tax debt.

    Even if you use a tax service to get filed, the best people to help with an outstanding tax debt are, of course, people who understand debt. Even if you work with an accountant to get your taxes filed, the accountant will not necessarily have access to tax debt resources.

    Instead, you want to seek advice from an experienced tax debt consultant, preferably one like DebtCare Canada with a specific program for dealing with the Canada Revenue Agency (CRA).

    3. Don’t negotiate with the CRA on your own.

    The CRA offers options to negotiate a payment plan and even has some debt forgiveness programs for outstanding interest and penalties. While these can help do not attempt to use them alone.

    This is because the CRA can take the information you provide through these programs and use it to start collection action. For example, if you fill out a financial disclosure form with your banking information, the CRA now knows where you bank and can decide to freeze your account if you miss a payment.

    It’s far better to work with a CRA negotiating specialist.

    4. Look for ways to pay the outstanding tax debt.

    Ideally, it’s better to not owe the CRA at all. So, if you know that you will owe a tax debt you can’t afford to pay, you would (generally) be better off financially taking out a loan or accessing home equity and paying the CRA with that money, and then owing the lender instead of the CRA.

    This is because CRA collection action is so much more aggressive than what the majority of creditors can enforce.

    Also, many lenders will arrange a fixed payment plan, so you can plan out repayment in a realistic timeframe with realistic terms. The CRA may not do the same.

    5. Consider debt consolidation options.

    What can you do if you can’t get a loan big enough to cover the tax debt? The answer here lies in debt consolidation.

    If you have too much debt to qualify for a loan, or a bad credit history, you might look into debt consolidation options, or filing for insolvency.

    Filing for a consumer proposal or for bankruptcy effectively takes care of your unsecured debts by declaring that you are unable to pay them.

    In a consumer proposal, you make a settlement proposal to your creditors – including the CRA. If accepted by the majority of your creditors, your unsecured debts are paid for with a lesser amount. You must be able to prove that your creditors will get more money this way than if you were to file for bankruptcy. In a consumer proposal, there is a debt limit of $250,000 (not including your mortgage).

    If you have more than $250,000 in debt, you might consider a different kind of proposal, or filing for bankruptcy. In a bankruptcy, your assets are often sold to make up the debt owed.

    While filing for insolvency is often not the first choice, it’s a better option than owing a tax debt to the CRA. If you owe a tax debt, the CRA can start collection action – which could include wage garnishments, freezing bank accounts, liens on assets, and in some cases even criminal charges.

    Also, if you wait to pay your tax debt, you will be charged even more because you’ll start to incur interest and penalties.

    If you file your taxes through an online service, like Liberty Tax, remember to:

    • File your taxes on time.
    • Reach out to a debt consultant if you can’t pay.

    At DebtCare Canada, we provide access to one of the only programs in Canada that can resolve a CRA tax problem. We can help you deal with your tax debt quickly.

    Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.

  • CRA Director Liability and You – Protect Yourself!

    CRA Director Liability and You – Protect Yourself!

    CRA Director Liability and You – Protect Yourself Before It’s Too Late!

    If you own, or are a director for, a company and accept trust money for the federal or provincial governments, you could be subject to CRA director’s liability.

    CRA Director Liability

    CRA director liability means that the Canada Revenue Agency (CRA) can decide that you owe a tax debt for your business – personally.

    Like anything, director’s liability is a process and there are ways that you can protect yourself if you’re assessed.

    Here’s what you need to know.

    What is CRA Director’s Liability?

    In Canada, incorporated businesses are considered separate legal entities from the owners’ personal assets and liabilities. If any debt is accrued by the incorporated business, the employees, officers, and directors are not held personally liable.

    However, this isn’t always the case – also known as director’s liability.

    If the CRA can’t collect an amount owing from the business directly, it may enforce director’s liability and assess the director, or directors, personally. This is most common with unremitted GST/HST trust money or unpaid payroll source deductions.

    What Happens if You Receive a Director’s Liability Assessment?

    If you are subject to director’s liability and can’t pay, the CRA might place liens on your assets, freeze your bank account, garnish wages, and more. And they can do this even if the corporation is no longer operating.

    If you are, or ever have been, the director of a corporation with a CRA tax problem, you need to act fast.

    How to Protect Yourself

    1. Do your due diligence.

    In the event that you are the subject of a director’s liability assessment, paperwork is your ally.

    If you can prove that you made your best efforts to have the corporation pay the GST/HST remittance or other deduction, then you may have a chance of having it overturned.

    According to Mondaq:

    “There is also a “due diligence” defence available to taxpayers who are assessed for CRA director liability by Revenue Canada. Subsections 227.1(3) of the Income Tax Act and 323(3) of the Excise Tax Act contain identical wording which states that a director is not liable for a corporation’s failure to collect GST/HST or Payroll Source Deductions if they “exercised the degree of care, diligence and skill to prevent the failure that a reasonably prudent person would have exercised in comparable circumstances”.

    However, this solution will likely require a tax lawyer and could end up costing more – especially if the circumstances cannot be proven.

    2. Make note of your resignation date.

    If you’ve resigned from the corporation, or are planning to resign, make sure the date is well-documented. This is because, in many cases, there has been a precedent set of a two-year limitation period.

    According to Lerners, many of the statutes that impose liability on a director have a two-year limitation period. For example, a claim for unpaid wages against a director under the Employment Standards Act, a claim for which there is no due diligence defence, cannot be made more than two years after a director resigns.

    However, if a director resigns on paper but continues to act like a director, then the two-year time limit is void. In addition, the resignation needs to be clearly stated. Lerners recommends being on the public record with your resignation and its effective date.

    “When government officials are considering an assessment against a director, the first place they check is the public record,” Lerners notes. “You do not want to be in the position where you receive a letter proposing to assess you personally when you resigned years before, but your resignation was never properly noted on the public record.”

    Again, this solution would most likely require a tax lawyer.

    3. Find solutions for the tax debt.

    There may be an event where you are being assessed for director’s liability and cannot afford to work with a tax lawyer or don’t have a defense available.

    In these cases, a CRA director liability assessment can be dealt with in the same ways as personal tax assessments: by making a plan for the debt.

    The CRA wants their money and you may have to pay it – so the solution becomes finding a way to raise the funds. This might include:

    • Taking out a secured loan.
    • Accessing home equity.
    • Insolvency options, like filing for a consumer proposal or personal bankruptcy.

    If you owe a director’s liability and know that you can’t pay it all, even if you use home equity or a loan, insolvency filing options may be the answer. When you file for a consumer proposal or personal bankruptcy, your unsecured debts — including tax debt — are included.

    This is the only way, besides paying the debt in full, to stop CRA collection action, such as requirements to pay, frozen bank accounts, and liens against your assets.

    Whether you decide to pursue litigation or deal with the CRA director liability tax debt directly, DebtCare Canada can help. We’ll go through your options and find the best way to stay protected.

    Do you have a CRA director liability, call 1-888-890-0888 or visit www.debtcare.ca for a free consultation.