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Category: CRA Collections

  • CRA’s Personal Income Tax Debt Collection – All You Need to Know

    This year has been a challenging one for most Canadians. Restrictions continued to evolve and business and individuals, across different provinces, are being impacted.

    The measures put into place to curb the spread of the COVID-19 pandemic have resulted in job losses and financial distress for many. Even though the government launched multiple programs to support Canadians, debt has continued to accumulate for many.

    While collection action was temporarily halted during the early months of the pandemic, the CRA has now resumed some of its compliance, audit, and collections programs.

    This blog helps answer the most frequently asked questions about personal income tax debt collection so that you can be more prepared when it comes to managing and paying off the tax debt.

    1. Has the tax debt collection resumed?

    Yes, as of September 2020, the CRA has resumed its debt collection activities.

    CRA officials are reconnecting with taxpayers to discuss outstanding payments, gauge their financial standing, and work out payment arrangements, where possible.

    1. Will I receive a call from the CRA?

    Yes, you will be contacted over the phone or via mail. Collections officers or agents from the debt management call centre will be informing you about the balance you owe and evaluating your financial situation.

    1. What can CRA do if I don’t pay my tax liability?

    While no legal actions are being taken (at this point), it is good to know about what actions can CRA take if debts are not repaid in a timely manner.

    Usually, the CRA sends you the notice of assessment or reassessment by mail and waits for 90 days before taking legal action.

    Though, when CRA proceeds with collection action, it will take an aggressive approach. To get the payment, CRA can seize your bank account, garnish your wages and even register a lien on your property.

    1. How should I deal with a CRA collections agent?

    The CRA is known to take a tougher approach than any other agencies. Hence, it is usually more difficult to negotiate favourable terms of payment with the agency.

    Collection officers get you to complete a financial disclosure form and once they have the information, they can use it to take actions such as garnishing your wages. Hence, we don’t ever recommend trying to negotiate with the CRA directly.

    To avoid weakening your case and to negotiate properly, it is important to approach them represented.

    1. How can an experienced debt consultant help?

    When you get notified about your tax debt, reach out to a debt consultant. Debt consultants have years of experience in dealing with CRA and have long-standing partnerships with industry peers.

    An experienced debt consultant can help negotiate a payment arrangement that works for you and the tax department collections agent. If you reach out to a debt consultant as soon as you are notified by the CRA, you can also avoid collection action.

    No matter what your situation is, they enable you to analyze all of your options, discuss various strategies for repayment, and bring together the resources you need to resolve your debt issues.

    At DebtCare, we work with you to create an action plan that not only reduces but ultimately eliminates your debt.

    Contact us today to learn about one of the only programs that can resolve a CRA back tax problem and get a free consultation. Call us on 1-888-890-0888 or visit www.debtcare.ca.

  • Debt Consolidation 101 – Dealing with CRA Collection Action

    Have you recently received a phone call or a letter from the CRA regarding your existing debt?

    That’s because, as of September 2020, the CRA has resumed its debt collection activities. The CRA has confirmed that it is reconnecting with taxpayers to re-evaluate their respective financial situations and discuss debt repayment options.

    The CRA has also started requesting voluntary repayment of CERB from individuals who have received it but did not meet the eligibility criteria.

    While no legal actions are being taken (at this point), it is good to know about what actions can the CRA take and what options do you have.

    What Happens if You’re Unable to Pay?

    If you have received a notice from the CRA and are unable to repay the debt, CRA is authorized to take certain actions that can have serious financial and/or legal consequences for you.

    As these are unprecedented times and many Canadians are facing financial distress, the CRA has temporarily stopped legal actions.

    For when legal actions do resume, the CRA normally will not take legal action until 90 days after mailing you the notice of assessment or reassessment.

    If you do not make timely payments or agree on a repayment arrangement, the following actions can be taken:

    I. Wage Garnishment

    Wage garnishment is done when tax debt goes unpaid. The CRA uses your federal income, GST/HST credits, and/or income tax refunds to obtain the payments.

    II. Asset Liens

    It is also possible for the CRA to obtain a writ or memorial to seize and sell the assets you own. These include your properties, your vehicles, and other assets.

    III. Third-Party Assessments

    In addition to garnishing wages and seizing assets, the CRA can hold a third party legally responsible to pay your tax debt. These include your spouse, business partner, or even a financial institution.

    Should You Look into Debt Consolidation?

    So, if you’re not able to make the payment and want to avoid further action from the CRA, is debt consolidation a good option?

    To answer this question, let’s define debt consolidation.

    Debt consolidation is when you obtain a new loan or sign-up for a program that helps ‘consolidate’ a number of smaller loans, debts, and/or bills into one, single monthly payment.

    There are a number of options you can look at depending on your situation. For instance, if you have equity in your home, you can obtain a second mortgage. This option offers low interest rates and preserves your credit.

    Obtaining a second mortgage, by leveraging your home equity, is a very practical solution that many homeowners in Canada opt for.

    Though, if a loan is not an option and you have multiple debt payments, you can look into a plan like a Consumer Proposal which can help you consolidate debt payments into one affordable monthly payment and ensure you are debt-free within 5 years.

    At DebtCare, we have created a debt repayment calculator that can help you quickly and easily estimate how you can be out of debt in five years or less!

    The Way Forward

    So, with so many debt consolidation options, which one is right for you? Financial consultants, like DebtCare Canada, can help you analyze all of your options, discuss various strategies for repayment, and bring together the resources you need to resolve your debt issues.

    Remember, when it comes to CRA debt, it is always good to have a proactive rather than a reactive approach.

    Contact us, for a free consultation, by calling us on 1-888-890-0888 or visiting www.debtcare.ca.

  • CERB Ineligibility and Repayment – Actions CRA Can Take in 2021

    If you have received a letter from the CRA regarding Canada Emergency Response Benefit (CERB) ineligibility – you’re not the only one.

    Many Canadians have received letters regarding repayment of CERB for one of the following reasons:

    • Collected CERB payments from both Service Canada and the CRA.
    • Did not meet the minimum income requirement.

    According to CTV News, 441,000 ‘educational’ letters were sent to Canadians by mid-December.

    So, if you have received a letter that states that you may not be eligible, it may be because the CRA has been unable to confirm your eligibility, possibly because you have not filed your taxes in 2019.

    If that’s not the case and you have filed your taxes, you might have to pay the benefit back.

    CERB Repayment and Eligibility

    The reason why there has been some confusion about eligibility is because of what is and what is not considered as ‘income’. For instance, the minimum employment or self-employment income required to be eligible for CERB ($5,000) is net income and not gross income.

    Additionally, the following sources of income are not considered as employment or self-employment income when it comes to CERB:

    • Pension income;
    • Student loans;
    • Employment Insurance payments;
    • Disability benefits;
    • Family support and social assistance payments;
    • Other benefits such as Canada Child Benefit (CCB);
    • And investment Income.

    So, if this criterion is not met, CRA is encouraging individuals to return the benefit they have claimed.

    The process for returning CERB is quite straightforward. If you applied for and received the CERB from the CRA and Service Canada, you can view step-by-step guidelines for repayment here.

    As of mid-December, according to Narcity, the CRA has received almost 1 million returns.

    What Action Can CRA Take?

    If you are unable to repay the benefit, the CRA requires you to contact them and make a payment arrangement.

    While CRA has taken a more relaxed approach to CERB repayments last year and informed individuals to repay the amount voluntarily, if the payments are not made, the CRA may take a tougher approach.

    While a stronger collection action has not been indicated at this point, once this amount gets added to your overall debt with the CRA, it can lead to the agency withholding benefits and credits, imposing penalties, as well as taking other legal actions.

    What Are Your Options? 

    So, when it comes to CERB repayment, you have the following options available to you:

    • Full repayment of the benefit.
    • Making repayment arrangements with the CRA.
    • If you’re unable to make payments and are dealing with additional debt, you can look into filing for bankruptcy or a consumer proposal. This is where a debt consolidation partner can help alleviate your debt burden.

    At DebtCare Canada, we are committed to helping you manage your debt and put strategies in place to become debt-free.

    If you are worried about CERB repayment or would like advice about debt management, you can contact us for a free consultation and an independent review of your financial situation.

    Reach out to us today at 1-888-890-0888 or visit www.debtcare.ca.

  • 2019 Tax Deadline Around the Corner – Let’s Review Current Penalties and Interest

    The Canada Revenue Agency (CRA) tax deadline for the 2019 tax year is coming up quickly. Are you prepared?

    The deadline to file your 2019 income tax is April 30, 2020.

    For self-employed tax filers, the deadline is June 15, 2020, however, it’s better to file by April 30 as you will be charged interest from May 1 to June 15.

    It’s critical to meet the CRA filing deadline to avoid late-filing penalties, interest, and collection action — even if you can’t pay.

    Here’s what you need to know about the 2019 tax filing deadline:

    CRA Interest

    One reason why you want to file on time and pay what you owe in full (or look into alternative options) is to avoid CRA interest charges.

    If you have a balance owing for 2019 and don’t pay it in full, the CRA can begin charging you daily compound interest on May 1, 2020. This includes any balance owing if the CRA reassesses your return.

    If you are charged penalties, such as a late-filing penalty, the CRA can also charge interest on this amount.

    If you have amounts owing from previous years, the CRA will continue to charge daily compound interest on those, too.

    CRA interest rates change every three months.

    CRA Late-Filing Penalty

    If you owe money to the CRA and miss the tax filing deadline of April 30, 2020 (or June 15, 2020 for sole proprietors) you can be charged a late-filing penalty.

    In 2019, this penalty was 5% of your 2018 balance owing, plus 1% of your balance owing for each full month your return is late, up to a maximum of 12 months.

    If you’ve been charged a late-filing penalty in the past three years, you could be charged even more for missing the April 30, 2020 deadline — 10% of your balance owing, plus 2% of your balance for each full month your return is late, up to a maximum of 20 months.

    This is why, even if you can’t pay your full balance, it’s still best to file your return on time.

    Repeated Failure to Report Income Penalty

    If you failed to report an amount on your return for the 2019 tax year and you also failed to report an amount on your return for 2016, 2017, or 2018, you may be charged a 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 2019.
    • 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.

    In some cases, if you voluntarily tell the CRA about an amount you failed to report, the CRA may waive these penalties. However, if you choose to go this route it is better to do so with an advocate on your side (like DebtCare!).

    False Statements or Omissions Penalty

    If you knowingly make a false statement or omission, or do so through gross negligence, you could be charged a penalty equal to the greater of:

    • $100
    • 50% of the understated tax and/or the overstated credits

    Again, in some cases, you can voluntarily tell the CRA about a false statement or omission and have the penalty waived. Again, it’s best to consult a debt counsellor first, such as DebtCare, before negotiating with the CRA.

    What To Do If You Owe Taxes But Can’t Pay

    As we’ve mentioned, if you know you will owe but can’t pay, it’s still important to file before the April 30, 2020 tax deadline.

    Don’t just hope that it will be overlooked or go away on its own – it won’t, and you’ll end up accruing more interest and penalties. In some cases, the CRA will waive the penalties or interest, but you will still owe the principal amount.

    Instead, make a plan for how you will pay what you owe.

    This could look like:

    • Making room in your budget to find the amount owing.
    • Taking out a personal loan that you can repay over a longer period and using the money to pay the CRA.
    • Consolidating debt.
    • Refinancing your mortgage.
    • And more.

    If you truly cannot pay, nor can you access a personal or debt consolidation loan, you can stop CRA collection action by filing for bankruptcy or for a consumer proposal.

    Get A Head Start By Contacting a Debt Counsellor

    At DebtCare Canada, we provide access to one of the only programs that can resolve a CRA back tax problem.

    Whether it’s personal income tax, HST, or payroll, DebtCare Canada can help! Get ahead of your tax problem. Reach out to us for a free consultation by calling 1-888-890-0888 or learn more about our CRA Tax Debt program at https://debtcare.ca/back-taxes/.

  • Requirement to Pay – If You Received One, Act Before Life Gets Uncomfortable

    A requirement to pay is one of the most uncomfortable forms of debt collection you can receive.

    A requirement to pay can be:

    • Sent directly to your employer (as a wage garnishment) so your employer will have to send a portion of your paycheque directly to the CRA. This can be embarrassing as now your employer will know you owe a tax debt.
    • Sent directly to your clients if you are self-employed or a sole proprietor. This is embarrassing and can also be damaging to your business if your clients switch to a competitor because they are worried about your financial situation.
    • Sent directly to the bank so the funds will be taken out of your bank account. You will be in for a shock when you go to access your account and find less in there than you expected, which could put you into financial trouble in other areas of your life.

    In any of these situations, a requirement to pay can make your life extremely uncomfortable at best, and at worst can result in long-lasting consequences that affect your reputation, finances, and livelihood.

    The solution? Take action — fast.

    Like any CRA collection action, a requirement to pay can be stopped by:

    • Paying the tax debt in full — however, this may not be an option if you don’t have the money available.
    • Filing for a consumer proposal or bankruptcy.
    • Working with a tax debt counsellor, like DebtCare Canada.

    The worst thing you can do is try to negotiate with the CRA yourself. At best, you will still have to pay the text debt in full and in a timely fashion, and at worst you may reveal information that allows the CRA to issue more requirements to pay.

    The better option is to work with a debt counsellor. For instance, at DebtCare Canada we offer one of the only programs that resolves CRA back taxes, including stopping collection action in its tracks.

    If you’ve received a requirement to pay from another creditor, we can help, too. We will work with you to stop the collection action as quickly as possible so you can avoid costly consequences — both financial and reputation-wise.

    If you’ve received a requirement to pay, don’t wait. Act now.

    Contact us 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.

  • Don’t Let the CRA Spook You – How to Stop a CRA Wage Garnishment

    With Halloween around the corner, we’re thinking about all of the scary financial situations that Canadians might face. And one of those that tends to spook people the most is a Canada Revenue Agency (CRA) wage garnishment.

    The CRA has broad garnishment powers. They can issue garnishments on your employment income, your bank account, and even other forms of income, like pensions. If you are self-employed, they can send requirements to pay to your clients. And unlike other creditors, the CRA doesn’t need a court order to garnish you.

    There are four ways you can stop a CRA wage garnishment:

    1. Pay the debt in full. If you can take out a loan or have home equity to access, this might be the time to use it.
    2. Get the CRA to agree to remove the garnishment. This is very difficult to do once collection action is in place. If you do attempt to negotiate with the CRA, you shouldn’t do it alone.
    3. File for a consumer proposal.
    4. File for bankruptcy.

    If you don’t have a sizable sum to offer or the ability to pay the CRA through a loan or home equity, then filing for a consumer proposal or bankruptcy will immediately stop a wage garnishment.

    So, what is the difference between a consumer proposal and a bankruptcy?

    Consumer proposals:

    • Are for non-mortgage debts up to $250,000.
    • Make a settlement offer to your creditors. The majority of creditors must accept this proposal for it to go through.
    • Typically, will not require you to give up any assets.

    Bankruptcies:

    • Are for any amount of unsecured debt. There is no limit.
    • May mean that you have to give up your assets.
    • Leave you with the worst credit rating possible — an R9.

    These options may seem extreme, but if you are faced with a CRA wage garnishment, they can be the better choice. The CRA will be aggressive with their garnishments and will not stop until they have recouped the full amount — plus any interest or penalties you have accumulated. This could mean thousands of dollars (or more) in garnishments by the time all is said and done.

    In turn, that could leave you struggling financially for months, or even years, on end. You need your employment income to pay your other day-to-day expenses, so having up to 20% to 50% of it (or more) go to the CRA could mean going even deeper into debt to other creditors.

    At DebtCare Canada, we can help you explore your options for stopping a CRA wage garnishment in its tracks. We will look at your credit rating, financial standing, and debt management choices to make the best plan of action.

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