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Category: CRA tax debt

  • 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.

     

  • Income Tax Time is Here – Preparing for the 2015 Tax Deadline

    2015 tax deadlineCanada’s income tax deadline for the 2014 tax year is right around the corner! While some anticipate refunds and are off to file with bells on, others are dreading this date and even considering not filing because of a tax debt that will follow.

    First of all, if you think you will owe, not filing is not the answer. You may think it will buy you time, but really all it will buy is penalties, interest and a bad history with CRA. If you think you will owe, be realistic about what you will owe and your ability to repay.

    Now, it is true that once you file CRA will ask you to pay the debt in full. With that said, CRA has been known to accept payment plans of up to 24 months on a tax debt. While there is no guarantee that this will happen for you, it has happened for others.

    If you took the amount of your tax debt and divided it by 24 months, would you be able to afford to repay the debt?

    If the answer is yes, the next steps you take are crucial.

    Negotiating directly with CRA can be dangerous. Before agreeing to any monthly payment arrangement they will ask for full disclosure of your assets, income, income sources, debt and more…

    The challenge here is that they may agree to payments over a 6 month period, based on a 24 month repayment, and then at the end of 6 months take the option to re-review your financial information. At this point they can reject renegotiating the monthly payments, demand payment in full and then use the information in your financial disclosure to take collection action against you.

    Another common occurrence is that when you submit an honest budget which includes your minimum obligations to other creditors, the CRA may then reject those payments and say that any surplus funds which could be directed to other creditors need to be directed to CRA. Even with all of this said, you absolutely do need to do something.

    If the answer was no…

    If you know that repaying the debt monthly, even over 24 months, is highly unlikely, you need to get some financial assistance immediately. A professional experienced with financial restructuring may be able to come up with a solution where you can repay the debt over a longer term, say 5 years.

    In either scenario…

    In either case, professional help is a necessity. Negotiating with CRA is, to be frank, too dangerous financially. Financial professionals with knowledge regarding dealing with CRA know how to navigate the bureaucracy and protect your information.

    Don’t ignore a tax debt in the hopes that it will magically disappear – it won’t. Call DebtCare Canada today: 1-888-890-0888.

  • How to Deal With a CRA Tax Debt Before The CRA Catches Up With You

    Tax debt can be terrifying; terrifying because owing the CRA money when you can’t pay will most certainly result in collection action. Tax debt is one of the main reasons people get behind filing income tax returns. Individuals get behind filing because the money to pay isn’t there and they fear that once the returns are filed the CRA is going to come looking for the money.

    If you have a tax debt or know that you will once you file late returns, don’t wait until the CRA catches up with you. You can beat them to the punch and get a plan together that will effectively deal with your tax debt.

    You see, you have more options to deal with a tax debt when the CRA has not begun enforcement action. A great example is homeowners who have tax debt. If you own a home, have a tax debt and the CRA puts a lien on your home, this will greatly reduce your options if you really cannot repay them monthly because the CRA will become a secured creditor.

    There are many financial options to effectively deal with tax debt. Look at a consumer proposal for example. By leveraging a consumer proposal you can freeze the interest accruing on your tax debt, potentially reduce the size of your tax debt and stop collection action such as a wage garnishment.

    The challenge is that your chances of being able to make a consumer proposal are greatly reduced once the CRA has taken enforcement action, secured through a lien on your home for example.

    The same is true for bankruptcy. If you were holding the bankruptcy card in your back pocket or hoping that filing for bankruptcy might seem like a way to get out of the tax debt, this too would no longer be a viable option once the CRA becomes secured on an asset like real-estate.

    The faster you deal with a tax debt the better. Never mind issues like enforcement action and financial planning; the existence of a tax debt and CRA collection action against you can result in damage to your relationships with your family or with lenders like your bank or mortgage holder, embarrassment at work and even health problems if you become stressed and have difficulty coping with your stress.

    You don’t have to put yourself through this. There are companies that can help you with your financial tax debt problem. Choosing the right solution for you can be easier said than done, but not if you know your options. Working with a financial consultant hired by you to represent your best interests is one excellent way to review your options and formulate your plan.

    Dealing with your tax debt before the CRA catches up with you will enable you to breathe a sigh of relief and move forward on a fresh footing.

    For more information about how to deal with a tax debt or if you have a tax debt and need help, please call DebtCare at 416-907-2582 or visit www.debtcare.ca.