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  • 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.

  • How Does the CRA Garnish My Wages? CRA Garnishment

    How Does the CRA Garnish My Wages? CRA Garnishment

    CRA Garnish My WagesA Canada Revenue Agency, a CRA garnishment is one of the most dreaded forms of collection action – and for good reason. If you’ve found yourself asking, “How does the CRA garnish my wages?” you’ve come to the right place.

    In a CRA garnishment (called a requirement to pay) the CRA can garnish your employment income or client invoices if you are self-employed.

    They can also garnish from your other sources of income, including any federal agency or department that owes you money, such as the Canada Pension Plan or Employment Insurance.

    What’s worse is that the CRA does not have to warn you about this, nor do they need a court order to garnish. If they have decided to garnish your wages, they will either contact your employer or your clients (if you are self-employed) and request that the necessary amount is taken off your paycheque or invoice and sent straight to the CRA.

    This can have far-reaching consequences. If you are employed, your employer will now know that you are in financial trouble, which could be embarrassing depending on your situation. It can be even worse if you are self-employed, as your clients will now know that you are struggling, which might make them question whether they should continue to do business with you.

    If your employer, other income providers, or clients are contacted by the CRA, they are legally obligated to comply with the payment request.

    The best course of action is to avoid a CRA garnishment before it even starts. Once a wage garnishment is in place, the CRA becomes that much harder to negotiate with.

    If you have advance warning of a garnishment, or know that you owe the CRA, it is in your best interest to look for ways to pay the taxes owing. If you can’t afford it, talk to a professional debt counsellor who can help you find the right course of action to make sure the CRA gets their money and your professional reputation is kept intact.

    If you’re already under a CRA garnishment, there are only two things that can force the CRA to involuntarily stop collection (besides paying the debt in full): filing for a consumer proposal or filing for bankruptcy.

    In a consumer proposal, an offer is made to your creditors to repay a portion of what you owe in lieu of the whole payment. The downside is that it can critically affect your credit score, so it will likely be very difficult to qualify for any type of credit until years later.

    Filing for bankruptcy leaves you with only one monthly payment, stops interest and collection action, and reduces debt, but your assets may be taken, and it also affects your credit in a major way.

    Both a request for consumer proposal and a request for bankruptcy must be filed through a Licensed Insolvency Trustee (LIT, or formerly known as a bankruptcy trustee) who takes a portion of what you pay.

    If you’re on the line for a CRA garnishment, you need someone who will represent you — and only you.

    This can include going over your debt consolidation options, making a plan to pay the CRA, or being your advocate while filing for a consumer proposal or bankruptcy.

    At DebtCare Canada, we provide all these services and more. Learn about how we can help today.

    Contact us for a free consultation. Call 1-888-890-0888.

  • Collection Agencies and The CRA – Do You Know Your Rights?

    Collection Agencies and The CRA – Do You Know Your Rights?

    When you owe money, whether to a creditor or the Canada Revenue Agency (CRA), this knowledge can be stressful. If you can’t pay and are being contacted regarding the debt, that stress is likely to increase tenfold. However, there are limits, and if a collection agency or the CRA is becoming more aggressive than you’re comfortable with, know that you have rights and are protected.

    Collection Agencies

    Collection agencies in Ontario are regulated by the Consumer Protection Act and their activities must adhere to certain guidelines.

    Before any contact occurs, a collection agency must first send you a written notice through regular mail notifying you of the person or business that says you owe them money, the amount you owe, the name of the collection agency and a statement that the creditor has asked them to collect the debt. Only after this has been sent can you be contacted, and not for at least 6 days after the notice has been sent.

    Here are some of the things a collection agency can’t do:

    • Contact you on a Sunday, except between 1 pm and 5 pm
    • Contact you on any other day of the week between 9 pm and 7 am
    • Contact you on a holiday
    • Use threatening, profane, intimidating or coercive language
    • Use undue, excessive or unreasonable pressure or harass you
    • Charge you any fees

    If you feel as though your rights have been violated by a collection agency, you have every right to file a complaint. You can find out more information about your rights and how to file a complaint here: https://www.ontario.ca/page/filing-consumer-complaint.

    The CRA

    The CRA is considered very different from collection agencies. That being said, their activities must also follow a strict set of guidelines. They are required to treat you with respect and integrity, and there is an entire Taxpayer Bill of Rights which outlines the rights of individual taxpayers when dealing with the CRA.

    Some of these rights include:

    • The right to privacy and confidentiality
    • The right to service in both official languages
    • The right to be treated professionally, courteously, and fairly
    • The right to complete, accurate, clear, and timely information
    • The right to lodge a service complaint or request a formal review without fear of reprisal

    The entire Taxpayer Bill of Rights, as well as the steps to take if you feel your rights have not be respected, can be found here: http://www.cra-arc.gc.ca/E/pub/tg/rc17/rc17-12-16e.pdf.

    At DebtCare, we often receive calls from individuals requesting information about their rights as far as collection agencies and the CRA are concerned. No matter what, you should never feel harassed or disrespected. If you’re currently dealing with a debt that is being enforced, we can help you better understand the various solutions.

    Call us today for a free consultation: 1 (888) 890-0888.

  • Tax Debt: Are You Self-Employed but Haven’t Filed Yet?

    Tax Debt: Are You Self-Employed but Haven’t Filed Yet?

    tax debtWe are well into July now and that means, if you are self-employed, your tax filing deadline has passed.

    If you filed on time, great, you’re set for another year. However, if you’ve yet to file, for whatever reason, you may be facing some serious penalties and a significant tax debt.

    Many people don’t file because they know they will end up owing and can’t pay or don’t have proof to support various write-offs.

    Often these individuals put off filing until the money to pay can be amassed (whether or not this is a realistic goal), while others choose to hold off in the hopes that the Canada Revenue Agency (CRA) will not be made aware of the transgression. Trust us, they will find out.

    The CRA is often the most aggressive when it comes to trust monies and tax debt. So, if you’ve collected HST all year, but didn’t file by the deadline, and thus have not declared or submitted these trust monies, the CRA is going to come in search of those funds.

    The CRA charges a late filing penalty of 5% of your balance owed plus an additional 1% for each month your return is late.

    As long as your return was filed by the June 15th deadline, you don’t have to worry about these penalties. However, you still have to worry about interest.

    Interest is charged on any unpaid balances at the established rates which are set by the CRA on a quarterly basis.

    Although your tax return is due on June 15th, interest will start to accrue the day after the personal tax filing deadline (April 30th). That means, whenever you do decide to file, if you owe, those penalties will be applied retroactively.

    Once the CRA is made aware of your debt, that’s when things can really start to get ugly. Although it is not illegal to owe a tax debt to the CRA, and thus prosecution is not a consequence, collection enforcement action is.

    Garnishments of your income, a frozen bank account, even a tax lien may be in your future.

    Our goal here is not to scare you.

    If this is the situation within which you currently find yourself, you’re probably already concerned and are looking for tax debt consolidation. Our goal is to impress upon you the importance of dealing with tax debt as soon as possible.

    Ignoring the problem will never make it disappear. It will actually just make things worse.

    If you’ve held off filing your taxes because you know you won’t be able to make the necessary payments, we can help with tax debt relief. At DebtCare, we have years of experience helping Canadian self-employed individuals and small business owners tackle troublesome tax debts.

    Get in touch with us today by calling 1 (888) 890-0888.

     

  • How to Stop a CRA Wage Garnishment

    How to Stop a CRA Wage Garnishment

    debt2You may be surprised to learn how many people have their wages garnished by creditors on a regular basis. This is such a common collection enforcement method, especially when it comes to the Canada Revenue Agency (CRA). We get calls on a regular basis asking about the ways to stop a CRA wage garnishment. This week we thought we’d tackle the topic and give you some tips to help.

    A wage garnishment is a method of collections which requires, in most cases, a court order. This order is then sent to your employer and they are required to remit a portion of your paycheque to your creditor. In the case of the CRA, a court order is not required. If your employer fails to comply, they may be liable for those funds.

    How does CRA find out where people work?

    • The most common method for finding out where you work is by asking. If, at any point, you’ve called the CRA to try and negotiate a payment plan, to try and discuss relief, etc., you’ve likely provided information regarding where you work.
    • Your T4s – your employer files a T4 with the CRA every year – this is part of their own tax obligations.
    • Someone you work for is audited by the CRA – meaning all employee documentation becomes part of that audit.

    When a wage garnishment is imposed by the CRA, the amount varies, but employment income up to 50% and self-employed income up to 100% is fair game.

    There are a few ways to stop a CRA wage garnishment.

    1. The first, and most obvious, is to pay it off. Once the debt is paid in full, that garnishment will be lifted.
    2. Going to tax court is another option, but this can be very expensive and there are no guarantees.
    3. Use an asset to finance the debt, such as your home, through a second mortgage.
    4. File a consumer proposal offering monthly payments to the CRA (this is often the only way to reduce a tax debt).
    5. File for bankruptcy.

    If you have no equity in assets and no ability to do anything more than make monthly payments, options 4 and 5 are viable options that will stop a garnishment immediately.

    When your wages are being garnished, this can take a significant toll on your ability to make payments with respect to other financial responsibilities, so it needs to be taken care of as soon as possible.

    Don’t wait – call DebtCare today. We can walk you through the various options and help you get that garnishment lifted. 1 (888) 890-0888.

     

  • Self Employed? Is a CRA Garnishment Going to Your Clients?

    Self Employed? Is a CRA Garnishment Going to Your Clients?

    CRA GarnishmentAnyone who is self-employed knows the many challenges that come with owning a business – and one of the greatest is dealing with the many complexities that come with the intricate tax process in Canada. Because of these complexities, many self-employed individuals find themselves owing money to the Canada Revenue Agency (CRA), for numerous reasons, and if unable to pay, face strict enforcement actions as a result. One of the most common of these is a CRA garnishment of your receivables.

    Here are some numerical facts when it comes to a CRA garnishment:

    The CRA can garnish up to:

    • 100% of subcontracted income
    • 100% of other income like pension
    • 100% of self-employed income

    If you are self-employed, the CRA can send a notice to your clients to direct your receivables to the CRA. This can cause significant financial hardship and stress, as well as the negative impact it can have on your client relationships.

    So, can you stop a CRA garnishment? It is difficult, but you do have options.

    1.     You can try to get the CRA to agree to stop, but know that the chances of this happening are slim to none. As far as the CRA is concerned, you owe the money and their job is to retrieve it. Also important to remember, in the process of trying to cooperate, many who attempt to negotiate divulge information to the CRA that can cause even more problems; providing financial disclosure can prompt further enforcement action, a frozen bank account or a property lien for example. This option should be avoided at all costs!

    2.     Consumer proposal. By entering into a consumer proposal you can immediately stop a garnishment – with the added benefits of stopping interest and likely reducing the size of your overall debt. However, there are a few caveats:

    o   If you have other creditors they will be included in the proposal too.

    o   If the CRA is your majority creditor, they have to agree to the proposal (if they don’t respond within 45 days they are deemed to have agreed).

    o   If you own a home and the CRA has a lien on it, this greatly complicates things.

    3.     Bankruptcy. Like a consumer proposal, this would immediately stop a garnishment, and is likely to stop interest and perhaps reduce the size of your overall debt. Things to keep in mind:

    o   You have to report income and your financial circumstances to a trustee every month – if your financial situation improves you will have extra repayment added which has to be paid before you can get discharged.

    o   Your payment to the trustee depends on your income and can change if there is an increase in income.

    o   If you own a home and the CRA has a lien on it, this greatly complicates things.

    If you are suffering from a CRA garnishment of your receivables, there are options to have the garnishment lifted while keeping yourself protected from further enforcement action. DebtCare has the tools and experience to help. Contact us today by calling 1-888-890-0888.

  • What to Do When CRA Collections Get Aggressive

    What to Do When CRA Collections Get Aggressive

    CRA CollectionsTax time is just around the corner, and for many Canadians this is just another item on the to-do list that takes a bit of time. For others however, tax time can be incredibly stressful, especially if you owe, or are going to owe, money. Once the Canada Revenue Agency (CRA) finds out about this debt, collection agents can get pretty aggressive – so how can you deal with this? Here are some tips on how to protect yourself when CRA collections come calling.

    Firstly, if a debt is owed to the CRA, and you have the ability to do so, pay it off completely. Once you are paid up, collection calls will cease and you will no longer have to worry about it.

    However, if you are not in a financial position to pay off the debt, other arrangements will be required. In this case, the CRA will often start out with a friendly call in an attempt to obtain your personal information and to create a monthly payment plan. At the beginning this may not seem too bad, but keep in mind this can end up hurting you in the end. As a result of your giving information freely, the CRA now has the ability to commence enforcement action (freeze your bank account, etc.) when you cannot meet their strict and unmanageable payment requirements (the CRA will not accept extended payment plans and interest continues to accumulate).

    If you refuse to give your personal information freely, this is when the situation can turn very ugly, very quickly. That ‘friendly’ CRA agent likely won’t seem so friendly anymore, and when collection calls begin it can be difficult to get them to stop. At this point, since a debt is owed, the CRA may initiate enforcement action, including garnishing your wages or placing a lien on your property.

    Negotiating directly with the CRA is not the best idea. However, paying the debt is – and therefore that should be your very first consideration. Certain avenues exist that may help you to rid yourself of those troublesome and concerning collection calls. Depending on the size of your tax debt, some of the options available may include a consumer proposal or debt consolidation.

    As mentioned, if you have the ability to pay a tax debt completely, do so. This will end up saving you not only interest, but the stress that accompanies this type of financial problem.

    For more information about how to deal with CRA collections, please contact DebtCare Canada by calling 1 (888) 890-0888 or visit us online at www.debtcare.ca