debtcare.ca

Category: CRA

  • Canadian Tax Consultants: Do You Have a Debt Relief Partner to Support Your Tax Clients Who are in Trouble?

    It is not uncommon to find out that your client is facing financial troubles – particularly during the time of a global pandemic.

    In fact, many independent professionals and tax specialists including personal tax accountants, tax preparers, bookkeepers, financial advisors, lawyers, and estate planners are amongst the first to learn that their client is facing financial turmoil.

    It can be a challenging situation when you are preparing a client’s books and your client reveals that they have a huge debt and no means to pay it off.

    Or, when your client is being audited and you know that the outcome will not be favourable.

    Where the CRA collections team is involved, the situation can get trickier. The CRA is relentless and when your client tries to manage their problem on their own – it can make matters worse.

    For instance, the CRA will look for financial disclosure that may lead your client to disclose where they work as well as their bank and asset details. Perhaps the CRA accepts a temporary arrangement – but the moment it is up, they can move forward with wage garnishments, freezing of bank accounts, and liens on the property.

    Today, an average Canadian owes $1.58 per dollar of disposable income.

    This debt is likely to increase when mortgage deferrals end, the government’s relief measures are withdrawn, and the CRA’s collection action resumes.

    This is the calm before a massive storm – would you agree?

    This is why it is great to have a partner in your corner who can independently represent your client and work with them to resolve their financial challenges.

    By providing your clients access to debt consolidation programs and opportunities for debt reduction, you are not only helping them navigate their financial challenges but are also strengthening your long-term relationships.

    This same level of service may not be received if you send your client to a trustee, this is because they offer insolvency as their service and your client will be counselled on that basis.

    Similarly, if you send your client to a bad credit lender who only offers high-interest products or a mortgage broker who only arranges mortgages, your client will only receive advice in those specific areas.

    At DebtCare, we provide access to many financial options and debt consolidation programs. We take on a consultatory role where the client pays for our consultation and after working with their financial profile, we guide them down the best path.

    This includes aligning all professionals that will be needed. Whether it is securing financing from a lender or working with a trustee to facilitate a consumer proposal, we can help.

    To learn more about our services for Canadian tax consultants, call or text us on 1-888-890-0888 or visit www.debtcare.ca.

     

  • Canada Emergency Response Benefit (CERB) and the CRA Tax Implications – Here’s What You Need to Know

    There is no denying that the Canada Emergency Response Benefit (CERB) helped many Canadians – over 8.5 million individuals to be specific.

    To get the money into the hands of the Canadians who needed it, the government processed applications as swiftly as possible. To do this in record time, the government relied very heavily on an honour system.

    This is why the benefit was handed out without further verifications at that time.

    CERB ends – what next?

    As of last week, CERB has officially ended. Though, individuals can still retroactively apply for CERB payments for any period before October 3 by December 3.

    As the CERB recipients are now being transferred to an updated employment insurance (EI) system, we take a look at CERB and its associated CRA tax implications.

    You will have to pay taxes on CERB as it is considered as income for this year. Here are a few things that can help you be more prepared for the next tax season.

    Did you qualify for CERB?

    As CERB was so new, many people weren’t sure if they qualified.

    Some people even received it twice as they applied through both Service Canada and the CRA for the same eligibility period.

    Here’s the eligibility criteria to help you ascertain if you were eligible:

    • You did not leave your job voluntarily.
    • You are over 15 years of age.
    • You earned a minimum of $5,000 (before taxes) in the last 12 months or in 2019.
    • You stopped working due to COVID-19, your work hours were reduced because of COVID-19, or you were unable to work as you were taking care of someone.

    In addition to being able to meet the criteria shared above, you also need to ensure that you only received one payment per eligibility period.

    Will the CRA impose penalties?

    Many people applied for CERB because they were dealing with financial problems that made it hard to make ends meet. Some of these individuals may not have been eligible.

    If you feel that you were not eligible or your eligibility changed over the period, it is prudent to seek tax advice and have financial strategies in place to deal with any action from the CRA.

    As the benefit was distributed without prior checks, the CRA will assess cases when taxes are filed.

    This is because, as CBC highlights, even a fraud rate of 1% could cost the federal government billions of dollars.

    So, if you are reassessed you will not only have to pay back the money but also penalties and interest retroactively. If you already have accumulated debt, you may be looking at potential new debt in the coming tax season.

    Tax debt and CRA collections are areas where we can help!

    We offer a free consultation to explore what options are available to you.

    As a debt and tax consultant, we can also look at your situation and give you an idea of whether you qualified for CERB, what the potential tax amount could look like, and what you can do to prevent collection action.

    Contact us, for tax advice, by calling us on 1-888-890-0888 or visiting 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 Convictions – Yes, People Really are Prosecuted for Filing Taxes Late

    Yes, it’s true — CRA convictions are a real thing and they happen to average people across the country.

    When it comes to filing taxes late, tax debt, and tax evasion, the Canada Revenue Agency (CRA) has many measures at its disposal. This includes collection action — such as wage garnishments, freezing bank accounts, and placing liens on assets — but they can also prosecute when they choose.

    Here are some examples of average, everyday Canadians who ended up with CRA convictions:

    1.     A British Columbia lawyer failed to report $1,284,254.81 of taxable income for the 2005, 2006, 2007, and 2008 tax years. He was sentenced on January 10, 2019 to a 22-month conditional sentence, including eight months of house arrest. He was also fined $418,865.66 after pleading guilty to one count of tax evasion under the Income Tax Act.

    2.     An Ottawa resident was sentenced to a nine-month conditional sentence, including six months of house arrest, and a fine of $68,000 after failing to report net business and rental income totaling $410,148 for the years 2009 to 2013. He was also required to pay the full amount of tax owing, plus related interest and any penalties assessed by the CRA.

    3.     A New Brunswick man pleaded guilty on June 10, 2019 to eight counts of tax evasion under the Income Tax Act. He was sentenced to a fine of $53,959. In addition, he will also have to pay the full amount of tax owing, plus related interest and any penalties assessed by the CRA.

    4.     The CRA seized six rental properties and an automobile belonging to two Ottawa residents charged with tax evasion. They were alleged to have underreported their income by $3,114,100 from January 2008 to December 2013, thereby evading $523,532 in federal income tax. The duo was arrested and then released with court-imposed conditions. 

    5.     A British Columbia land developer and builder was sentenced to pay a $23,100 fine after being found guilty on two counts of tax evasion and one count of making false statements under the Income Tax Act, and one count of GST/HST evasion under the Excise Tax Act.

    According to the CRA, for the five-year period of April 1, 2013 to March 31, 2018, the courts have convicted 307 taxpayers of tax evasion. This involved $134 million in federal tax evaded and court sentences totaling approximately $37 million in court fines and 2,964 months in jail.

    When taxpayers are convicted of tax evasion, they must still repay the full amount of taxes owing, plus interest and any civil penalties assessed by the CRA. In addition, the courts may fine them up to 200% of the taxes evaded and impose a jail term of up to five years.

    Tax evasion can be a slippery slope — you may fear filing taxes late or know you can’t pay, so you don’t file them at all, which can end up leading down an even worse path.

    If you do file taxes late, you may also be subject to CRA interest and late-filing penalties, which can add to the amount you owe.

    But there is a better option than filing late or not filing at all — work with a tax debt expert.

    At DebtCare Canada, we can help you deal with a tax debt situation. If you haven’t filed yet, or have filed but can’t pay, we provide access to one of the only programs that can resolve a CRA back tax problem.

     ·       Often your principal tax debt can be reduced.

    ·       Interest and penalties immediately stop.

    ·       Frozen bank accounts are unfrozen.

    ·       Wage garnishments are lifted.

    ·       Garnishments to customers are lifted.

    ·       You are able to make a single monthly payment.

    And you won’t be subject to CRA convictions!

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

  • 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.

  • 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.