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Category: Articles

  • Tax Relief and the Canada Revenue Agency Tax Payer Relief Program Who Qualifies?

    When an individual or business falls behind filing tax returns, it is imperative that they become tax compliant.  Filing tax returns and being up to date is very important. It is important because as long as tax returns remain in arrears the taxpayer will not only face massive interest and penalties, but could also face prosecution.

    Usually financial problems are the primary reason cited for people falling behind in filing their tax returns. They don’t file because they know that once their tax returns are filed they will face the daunting task of paying their tax debt, in its entirety, to the Canada Revenue Agency.

    The Canada Revenue Agency Tax Payer Relief program offers individuals and businesses the ability to request relief of interest and/or penalties.  This is not tax relief; the Canada Revenue Agency will not reduce the actual tax debt and under this Tax Payer Relief Program, only interest and/or penalties can be forgiven.

    Applicants who want to apply for taxpayer relief under the Canada Revenue Agency Tax Payer Relief Program will have to satisfy the Canada Revenue Agency (C.R.A.) that any one of four circumstances prevented them from filing their tax returns or from paying their tax debt. These circumstances include:

    1.       Significant financial hardship.

    2.       A serious medical problem.

    3.       A natural disaster.

    4.       An error on the part of the Canada
    Revenue Agency.

    Very few applications for taxpayer relief are approved. Before one considers whether the cost of hiring a representative to make an application for interest and penalty relief under the Canada Revenue Agency Tax Payer Relief Program is worth his while, he should first consider if he even has the ability to pay his principal tax debt in full.

    Once a tax debt is owed to the Canada Revenue Agency, they will demand to be paid in full. They will also proceed to collect their money. Collection action could include wage garnishments, property liens, freezing bank accounts and more. Business owners could face having their customers notified of their tax problem and have a set off placed on their receivables.

    Directly attempting to negotiate with the Canada Revenue Agency is similar to playing Russian roulette. In most cases they will not make a voluntary payment plan with you unless you offer complete financial disclosure. Once they learn where you bank and what assets you have, you are in a very vulnerable position. Most voluntary payment plans that individuals self-negotiate are short term, so once the term is up and the taxpayer tries to negotiate another payment plan, they will refuse. This is simply due to the fact that they now have full financial disclosure, at which point they will proceed with further enforcement action ensuring that they collect all of their money.

    The good news is that Federal Government programs do exist. Programs that do offer taxpayer tax relief will not only eliminate interest and penalties but will also reduce the size of a taxpayer’s tax debt significantly. To see if you qualify for tax relief, you must deal with an agency that can provide you with access to these programs. For more information about tax relief and the C.R.A. Tax Payer Relief Program please contact DebtCare Canada at 888-890-0888 or visit www.debtcare.ca

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  • Small Business HST and Past Due Tax Returns What You Need to Know

    HST has intensified the tax obligation of small business owners. Prior to the HST, many small business owners only had to collect and remit 5%  GST. With the amount that must be collected and remitted increased to 13%, the stakes for those who fall behind in filing their HST returns is much higher.

    The Canada Revenue Agency is much more aggressive when collecting past due HST as opposed to GST because the tax revenue for the government is now more than double. In conjunction with that, they are also more diligent in their reviews of HST tax returns and claim expenses.

    Once tax returns (including GST returns) are more than 4 years past due, the Canada Revenue Agency will not permit the taxpayer to claim input tax credits. The interest and penalties on past due HST and GST returns are massive.

    According to the Canada Revenue Agency website http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/bspsbch/rtrns/pnlts-eng.html, when GST/HST returns are filed late the following formula will apply to tabulate the penalty that will be applied to the tax debt:

    a)     1% of the amount owing; plus
    b)      the result of the following calculation:

    A x B where A is 25% of the amount you calculated in (a) and B is the number of months the return is overdue (to a maximum of 12 months).

    In addition, the Canada Revenue Agency will also charge interest on an overdue amount equal to the basic rate plus 4%. Late filing of a GST return is not the only way you can incur GST penalties. You can also be fined for non-compliance. If you receive a demand to file a return and fail to do so, a penalty of $250 will be charged.

    This can cause a GST/HST tax debt to double or even triple in size. Facing this type of tax problem, especially where multiple past due returns are involved, can be paralyzing. It simply can’t be ignored because it will not go away on its own.

    Fortunately, there are programs that are not offered through the Canada Revenue Agency but are Federal Government programs that will provide a small business owner tax relief as well as relief of interest and penalties. These programs do not involve bankruptcy, and not only will they eliminate interest and penalties but will also reduce the size of the overall tax debt.

    It is best not to wait until the Canada Revenue Agency is pursuing enforcement and collection action. Act now and take the steps necessary to deal  with a tax debt. If collection action has already begun, these Federal Government programs will stop all collection action including garnishments and frozen bank accounts. For more information about small business HST and past due tax returns please contact DebtCare at 888-890-0888 or visit www.debtcare.ca

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  • Back to School Blues? Consolidate Credit Cards and Stop the Interest

    The back to school season, particularly for parents, is often a very hectic time of year, especially with regard to finances. The need/desire for new school clothes, shoes and supplies often leaves parents with racked up credit cards once all is said and done – or rather, purchased. And often accompanying these credit card bills is the challenge of finding money to pay them off.

    Check out this infographic from BMO to see just what these costs add up to:

    debt1

    So, what options are available? Consolidating credit cards is a great way to reduce your debt – and often makes sense – but the type of consolidation depends on your own personal circumstances. Here are a few options that may be available to help you deal with that back to school debt.

    1. Home equity loan. By using the equity in your home, you can consolidate credit cards, thereby reducing interest and consolidating the various bills into one monthly payment. Of course, this is only possible if you own a home and have sufficient equity for this purpose. If you rent, or are without equity, this is probably not going to be a viable option for you.
    2. Consumer proposal. This is another great option, especially if your credit isn’t great or if you don’t have the security or equity for a loan. A consumer proposal will have some impacts on your credit in the short term, but this is balanced out by the fact that interest stops accumulating, there is, like a loan, just a single monthly payment, and in many cases the overall debt owing is reduced.
    3. Line of credit or loan from a lender. This is another good option, and can achieve the same things as a home equity loan: lower interest and one monthly payment. You will need to have good credit or security for this option. At the same time, this is often the most expensive option of all because it will involve higher interest than a home equity loan or a consumer proposal.

    Kids are expensive, and when back to school season rolls around, they can become even more so. Once those bills start coming in, don’t stress. Call DebtCare Canada to find out about how to consolidate credit cards and get rid of debt: 1-888-890-0888.

     

  • Is the Big Bad Wolf Calling?

  • What Does A Trustee Do?

    If you have financial problems and have thought about consulting a trustee in bankruptcy, you may be curious about the role that they play in helping you deal with your financial problems, and may be asking yourself “what does a trustee do anyway?”

    The first thing to know is that a trustee in bankruptcy does not represent you. You may have seen advertisements by trustees that make it seem as though they want to help you. What does a trustee do? Well, they are a court appointed officer that administers bankruptcies and consumer proposals. They have an obligation to act in the best interest of both you and your creditors.

    Let’s look at a bankruptcy as an example. When you visit a trustee to file for bankruptcy they review all of your household income, debt and other financial details and then advise you on what your monthly payment in bankruptcy will be. You make your monthly payment to the trustee in bankruptcy each month. If you have assets or surplus income for example, what does the trustee do? They will ensure that they collect equity in those assets or surplus income for the benefit of your creditors. They are not there to protect your income and assets, they are simply administrators of the bankruptcy process. If they can collect more money through your estate for your creditors, they will.

    Consumer proposals are also administered by trustees in bankruptcy. When you visit a bankruptcy trustee directly to discuss a consumer proposal, they will assess your income, debt, assets and other personal household and financial information. What does a trustee do next? They will suggest an amount of a consumer proposal that they believe will be accepted by your creditors. This does not always result in the best deal for you, and if you visit a trustee directly you will have little to no negotiating power because they are simply administering your consumer proposal, so what they present to you is what they will be prepared to go forward with. They are not there to get you the best deal.

    Do you do your taxes without the help of an accountant? Not likely. If you were charged with a crime would you defend yourself without a lawyer? Probably not. Dealing with a trustee in bankruptcy is no different; you should not do so unrepresented.

    Having independent financial representation when considering a consumer proposal or bankruptcy is crucial because it enables you to have your personal and financial information reviewed by a professional who represents and is hired by you and who understands bankruptcies and consumer proposals. They can vet your personal and financial information, identify any issues before a trustee is made aware of them, and help you come up with a proposal to present to the trustee that you can live with.

    Do not answer the question “what does a trustee do” the hard way. Filing a bankruptcy or consumer proposal is an official process. Once you have committed to either one of these processes there is no turning back, so it is important to do everything in your power to ensure that you enter into the process with all of the necessary information. The more informed you are, the better financial arrangements you will be able to make, which will save you thousands.

    If you have more questions about this article “What does a trustee do?” or if you need representation in a consumer proposal or a bankruptcy please visit www.debtcare.ca or call 416-907-2582.

  • How to Rebuild Your Credit Blog Series – Part 4 Having Too Many Credit Products and Too Much Debt

    This is the fourth blog in a 4 part blog series about how to rebuild your credit. When you accumulate too much debt or have too many credit products, this can harm your credit. Credit card companies are aggressive, using marketing points programs, promotion and incentives to entice consumers to take out a credit card. Over time, it is not difficult to find yourself with several different credit cards with balances that are accumulating interest.

    If you want to know how to rebuild credit and you have several credit cards, your first step will be to close some of them. Some financial advisors will tell you that closing credit cards will actually harm your credit, when in fact in the long run getting rid of credit cards will increase your credit score. Having one or two credit cards is sufficient to have good credit so if you have more than that, closing some of them is a good idea. How you go about closing credit cards is the key.

    Firstly, closing all of your credit cards is not a great idea unless it is part of an overall plan to settle out your debt, and then taking out a single card to rebuild your credit. Simply closing down all of your credit cards without a plan to have a credit item to rebuild credit will reduce your credit score. If you have accumulated a lot of credit card debt and are working with a company to get rid of your debt with a plan to rebuild, then naturally it will involve wiping the slate clean (clearing and closing all credit card debt) and then starting fresh. In the absence of a financial plan to rebuild, closing all of your credit cards may reduce your credit score because you will not have credit reporting to your credit report. This is necessary to build your credit score because it shows new potential creditors, mortgage providers for example, how you pay your monthly obligations.

    Also, do not close out credit cards that have balances. If there are balances on credit cards you should first deal with the balances either by paying them off, settling them, or including them in a financial program to get out of debt. Once the balances are cleared, you can go ahead and close out the card. If you close cards when you have balances the result will be a credit card that has a balance and a zero credit limit and this will have the same negative impact on your credit report as if you have a credit card that is maxed out (see part three “Credit Balances That Are At, Close to or Over” in our four part blog series How to Rebuild your Credit).

    Additionally, if you plan to close out your credit cards make sure you write to the credit card provider clearly indicating that it is you who wants to close out the credit card balance. When a creditor closes your credit card they can report one of two things to the credit bureau: “credit limit closed by consumer” or “credit limit closed by credit grantor” – you do not want the latter reported on your credit report. Sending a letter will enable you to prove to Equifax that you in fact closed the card in the event that the credit does not report who closed the card accurately.

    This may all seem like good advice, but if you are drowning in credit card debt, closing credit cards right now is not really an option without a financial plan. Learning how to rebuild your credit takes time, as does dealing with accumulated credit card debt. There are fast and effective methods to deal with debt and start rebuilding your credit, but in most cases they will involve the assistance of a financial professional who can guide you out of your debt with a plan.

    If you would like more information about how to rebuild your credit or if you are in debt and need some guidance, please call DebtCare at 416-907-2582 or visit www.debtcare.ca.