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Category: CRA

  • CRA Collections and You – How You Can Protect Yourself

    Canada Revenue Agency (CRA) collections can be financially and personally devastating. Whether you’re hit with a wage garnishment, frozen bank account, or lien against your property, the effects can be far-reaching. It might impact your ability to pay your regular bills, alert your employer or clients to your financial position, or put your assets in jeopardy.

    CRA collections can begin without warning and without a court order.

    Often, when a person is hit with a CRA collection action, they ask, “How did the CRA find out my personal information?”

    The answer, usually, is that you told them.

    If you’re talking to the CRA, you need to be careful about what you voluntarily disclose. They can’t begin collection action unless they know where to collect from. For example, your bank account can’t be frozen if the CRA doesn’t know where you bank.

    One of the ways the CRA gets your personal information is through financial disclosure forms. For instance, say you wanted to make a payment plan with the CRA to pay your tax debt. You might directly contact the CRA to do so. They may indicate that they are willing to accept a three-to-six-month payment plan based on $500 per month if you fill out a form providing financial disclosure.

    This form might ask for information about your income, income sources, expenses, assets, liabilities, where you bank, and more. And now they have all this information on file. Even if they accept your payment plan this year, they might not be so lenient if it happens again in a following year. And now they will know where to collect from.

    There’s another added danger of providing this information: once they have your data, the CRA could go back on their original payment plan offer and demand a much larger monthly payment based on what you’ve disclosed.

    They may accept the lesser monthly payment for three-to-six months, but if they demand more, or if you don’t meet the payment plan obligations, the CRA will have all of your personal financial information that you provided in the financial disclosure form and can proceed to take enforcement action against you.

    They can also get your banking information in other ways. For example, if you make a payment to the CRA using your main chequing account and you still owe money, expect your bank account to get frozen.

    You also might unknowingly provide personal information just by talking with a CRA agent on the phone. Remember, they are trained to seem friendly, so you feel comfortable talking with them and revealing personal details. But the friendship isn’t all it seems. Once they have what they need, expect the CRA to turn to collection action.

    All of these reasons are why many agencies advise people who have large tax debts not to deal with the CRA directly. The CRA may say they are willing to negotiate, but they are agents hired by the government to collect the tax debt from you. Their primary objective is to close your file, which can only happen if you pay the amount in full (or you end up filing for a consumer proposal or bankruptcy).

    If you know you owe the CRA and can’t pay in full, you need a plan before even initiating contact.

    • Don’t contact the CRA on your own.
    • Don’t attempt to negotiate with the CRA.
    • Don’t fill out any financial disclosure forms they provide or answer other personal questions when speaking with an agent over the phone.

    Instead, contact a financial consultant to explore your options so you can get your CRA tax debt cleared before collection action is started.

    DebtCare provides access to one of the only programs that can resolve a CRA back tax problem. We can help you before the CRA registers a lien against your home, issues one of your customers a requirement to payorder, or freezes your bank account.

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

  • Missed the Tax Deadline? Read Our Complete Guide to CRA Penalties and Interest

    The 2018 personal tax filing deadline was April 30, 2018. Seeing as we’re now in August, if you missed it and you owe money, you’ve likely racked up Canada Revenue Agency (CRA) penalties and interest by now.

    Late-Filing Penalties and Interest

    According to the CRA, late-filing penalties and daily compound interest start accumulating on May 1, 2018 for any unpaid amounts owing for 2017. You could be charged:

    • 5%of your 2017 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
    • 10% of your 2017 balance owing, plus 2% of your 2017 balance owing for each full month your return is late, up to a maximum of 20 months, if you’ve been charged a late-filing penalty on your return for 2014, 2015, or 2016.

    The above amounts are what you could be charged after filing your tax return late. However, if you decided to not file at all, the consequences could be even worse.

    Failure to Report Income Penalty

    If you fail to report an amount on your return for 2017, and you also failed to report for 2014, 2015, or 2016, you may have to pay a federal and provincial/territorial repeated failure to report income penalty.

    Any amount of income of $500 or more that was not reported is considered a failure to report income.

    These penalties are each equal to the lesser of:

    • 10% of the amount you failed to report on your return for 2017; and
    • 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.

    False Statements, Omissions, and Gross Negligence

    If you make a false statement or omission on your 2017 tax filing, you could be charged an additional penalty:

    • $100; and
    • 50% of the understated tax and/or the overstated credits related to the false statement or omission.

    This penalty can be charged whether you knew about the false statement, or if it is caused by “gross negligence,” for instance if you paid somebody else to file your return for you (like an accountant) and they made an error. Even if you pay somebody else, you are still responsible for the accuracy of your return.

    CRA Collections

    If you fail to pay an amount owing on your tax return, the CRA can begin collection action. This can be financially devastating, and publicly embarrassing. Common collection action includes a wage garnishment, a frozen bank account or putting liens on your assets.

    The CRA can begin collections without warning and without a court order. Once a collection action is in place, it becomes even harder to negotiate with the CRA. If the CRA has started collection action, time is not on your side. The only two things that can force a CRA collection action to stop (besides paying the debt in full) are filing for a consumer proposal or filing for bankruptcy.

    What to Do

    If you’re reading this blog, it’s possible that you’re several months behind on filing your tax return, or you haven’t yet paid back the amount you do owe. If this is the case, you don’t want to delay it any longer — that will just result in even more charges, CRA collections, and potential court action for tax evasion. But you don’t have to go it alone.

    You need an expert that can look at your whole financial picture and put together a plan that will work for you.

    At DebtCare Canada, we can help with your tax debt, whether it’s personal income tax, HST, or payroll. We provide access to one of the only programs that can resolve a CRA back tax problem.

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

  • 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.

  • Two Ways to Get Out of Debt in 5 Years or Less

    What is the best way to get out of debt fast?

    Unfortunately, when it comes to debt there is rarely an easy way out. You likely didn’t get into debt overnight, so it’s going to take some time to regain your financial freedom. But there are options that can significantly speed up the process.

    We’re looking at two of these options: filing for a consumer proposal and securing second mortgage financing. Read on to determine if one would work for you.

    1. Consumer Proposal

    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.

    A consumer proposal is generally termed over five years. It is suitable for someone who is loaded in debt, making minimum payments, has defaulted on debt, or is having problems managing payments. It stops collection action and interest.

    You might be eligible for a consumer proposal if you:

    • Have under $250,000 in debt (excluding your mortgage).
    • Are a higher-income earner who has gotten into a bad financial position.
    • Are a homeowner with some equity available.

    However, filing for a consumer proposal has its downsides, too. For one thing, it can critically affect your credit score, making it extremely difficult to qualify for credit for years after the fact. It must also be filed through a Licensed Insolvency Trustee (LIT, or formerly known as a bankruptcy trustee) who takes a portion of what you pay. And there is no guarantee that the majority of your creditors will accept your proposal; you have to prove that this option would be more lucrative for them than if you filed for bankruptcy instead.

    If you’re considering filing for a consumer proposal, it’s best to seek the advice of a qualified debt consultant who represents you and isn’t making income off of your consumer proposal.

    1. Second Mortgage Financing

    If you’re a homeowner, securing a second mortgage might be available to you.

    A second mortgage doesn’t affect the first mortgage and it can be amortized over five years to see you out of debt, without stretching out over 25 years like your first mortgage.

    It’s best suited to those with home equity (at least 20% to 30%) and good credit. If your credit score is low, but you have equity, there may still be a lender who can help but it likely won’t be a prime lender.

    A second mortgage can be a good way to consolidate debt, so long as you can make the payments on time. It can allow you to pay off your other outstanding debts and only have one monthly payment. Second mortgages typically carry a higher interest rate than first mortgages, but the rate is still often lower than the interest you might have from credit cards, car lease payments, or unsecured lines of credit.

    If your debt is so large that it couldn’t be paid off with a second mortgage, or you’re not eligible for one, then filing for a consumer proposal might still be your best option.

    You don’t have to assess your financial situation alone. Handle everything in one place and get your financial advice from someone who represents you and can deploy all financial solutions.

    At DebtCare Canada we have financial programs that offer help to people with all types of credit and income. We can help you secure a second mortgage, represent you while filing for a consumer proposal, or explore other debt consolidation options.

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

  • 30-Day Countdown: How to Tackle Back Taxes and Tax Debt

    The 2017 income tax deadline is on April 30, 2018. Have you filed your taxes yet? If you’re waiting or afraid to due to back taxes or because you’ll owe a tax debt, read on…

    If you have back taxes:

    When you owe back taxes, the best thing you can do is consult a financial professional before the income tax deadline. Don’t try to negotiate with CRA directly — that can be a dangerous game. A debt consulting organization can help you take stock of your situation and make a repayment plan. DebtCare Canada has one of the only programs that can resolve a CRA back tax problem.

    If you’ll owe a tax debt:

    Not filing because you know you’ll owe? That’s about the worst thing you can do. Tax evasion is illegal, but it’s not illegal to owe. Failing to file your taxes before the 2017 deadline will only lead to more trouble — namely CRA interest and penalties.

    In 2018, CRA starts charging interest on May 1, 2018 at a daily compound rate. And CRA late-filing penalties are also hefty: 5% of your 2017 balance owing, plus 1% of your balance owing for each full month your return is late to a maximum of 12 months. Plus, if you’ve been charged a late-filing penalty in a previous year, you could be charged 10% of your balance owing, plus 2% for each full month your return is late for up to 20 months.

    The key is to avoid enforcement action. CRA is powerful and can garnish wages and freeze your accounts even without a court order. They will come after you, and fast. And if you can’t pay in full, CRA may negotiate with you, but it’s not likely to be to your benefit.

    What can you do instead? Don’t contact CRA until you know how you will proceed. They will use your information against you.

    If you owe a tax debt, don’t delay filing, but do consult a financial professional. With 30 days to the deadline, you still have time to do so. A debt counsellor can help you explore your tax debt repayment options.

    DebtCare Canada offers one of the only solutions that stop CRA, freeze CRA interest, stop collection action, and can actually reduce the principal tax debt.

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

  • CRA Penalties, Interest, and More – What to Do if You Will Miss the 2017 Tax Deadline

    The 2017 income tax deadline is nearly a month away. April 30, 2018 is the date you must file by or be subject to Canada Revenue Agency (CRA) penalties, interest, and possibly collection action.

    Tax time can be a source of stress — gathering your receipts, filing your return, and worrying about whether you’ll owe can be a hassle that’s tempting to avoid. But like it or not, paying taxes is something that can’t be avoided and if you attempt to do so, the stress and consequences will only be worse.

    Consider this case, reported on the CRA website. On December 4, 2017 a Cobourg, Ontario man was sentenced to a fine of $97,173 after pleading guilty to two counts of tax evasion for failing to report income on his personal tax returns from 2006 to 2007. This court-imposed fine is only one part of what he must pay. He also has to pay the full amount of tax owing (an additional $97,173) PLUS related interest and any penalties assessed by the CRA.

    This is a cautionary tale, but it’s also not uncommon. Between April 1, 2012 and March 31, 2017, courts have convicted 408 people for CRA tax evasion. This involved $122 million in federal tax evaded and court sentences totaling approximately $44 million in court fines and 3,103 months in jail.

    If you’re worried you’ll miss the 2017 income tax deadline, here’s what to do instead:

    1. File Before April 30, 2018

    If you’re owed money and you don’t file before the 2017 income tax deadline, you’ll just have to wait longer for your refund — and who wants that? Even if you’ll owe a tax debt, it’s better to file before the deadline to avoid CRA penalties.

    Interest begins accumulating on your tax debt on May 1, 2018 at a daily compounded rate. And on top of the interest, you’ll have to pay the CRA late-filing penalty.

    The CRA late-filing penalty is 5% of your 2017 balance owing, plus 1% of your balance owing for each full month your return is late to a maximum of 12 months. And if you’ve been charged a late-filing penalty in a previous year, you could be charged 10% of your balance owing, plus 2% for each full month your return is late for up to 20 months. That’s a lot of extra money to pay on top of the balance you already owe. It’s in your best interest to file by April 30 and avoid the CRA penalties.

    1. Make a Plan to Pay

    If you can afford it, paying your tax debt in full is the best option for avoiding CRA penalties. Look at your budget and see where you can save to pay the tax debt.

    If you absolutely can’t pay in full with your current income, you may have other options available to you. For example, if you own a home with equity available and have good credit, you could be eligible for a home equity loan, which would allow you to pay off your tax debt and then pay your loan off over a fixed repayment schedule. If you don’t own a home, or don’t have equity available, there could be other lending options that you can access.

    Don’t share your income and expenses with CRA. Get a plan together first.

    1. Seek Professional Help

    If you’re going to miss the 2017 income tax deadline because you can’t pay your tax debt, even with a loan, consult a financial professional. Debt counsellors can help you go over your options, see what options are available to you, and help prevent or stop CRA collection action. Burying your head in the sand isn’t going to change your situation and will actually make it worse. If you’re not sure what to do, a professional debt consultant can help you find the way.

    DebtCare Canada can help you avoid the consequences of CRA penalties.

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

  • Question Corner: When Will CRA Garnishment Happen to Me if I Owe?

    The 2017 income tax deadline is looming on April 30, 2018 and with it the consequences of not paying a tax debt in full. One such consequence if you fail to pay a tax debt is Canada Revenue Agency (CRA) garnishment.

    A CRA garnishment is just one of several scary collections tactics that can happen if you fail to pay your taxes. CRA can garnish up to 50% of your employment income and 100% of your other income, such as contracts or pensions, simply by sending a letter to your employer, or your clients if you are self-employed. The person who receives this letter is legally obligated to send your money straight to CRA or they could face court action.

    Unlike other creditors, the CRA doesn’t need a court order to obtain a wage garnishment. And, scarier still, you may not even know when a CRA wage garnishment will start.

    A CRA garnishment can start any time after the 2017 income tax deadline once CRA has processed your income tax return and provided you with a notice of assessment. This is where you will see the exact amount that you owe.

    If you can’t pay the tax debt in full, that’s when wage garnishment and other collection tactics can begin. You may be able to make a payment arrangement with CRA, but this is nearly impossible for an individual to do on their own. And even if you are sending payments to CRA, they may still garnish.

    If you don’t pay your tax debt and CRA finds out where your income comes from, you are at risk for a wage garnishment.

    CRA can find out your income source in many different ways, such as:

    • You tell CRA or name your employer on a budget or disclosure forms given to CRA.
    • Tax filings by your employer(s).
    • Your client or supplier is audited.
    • And many more.

    There are options to stop a CRA wage garnishment depending on your income, assets, and debt. Some of these options will immediately stop a wage garnishment. Debt consulting companies, such as DebtCare Canada, can assess personal circumstances and arrange whatever solution is the right one.

    Don’t wait – call DebtCare today. We can walk you through the various options and help you avoid a CRA garnishment. 1-888-890-0888.

  • The Taxman Taketh Away: How to Reduce Crippling CRA Penalties

    CRA penalties and interest can be crippling and even double the size of a tax debt. We’ve all heard horror stories about the CRA and its efforts to enforce repayment. If you are facing Canada Revenue Agency (CRA) penalties, then you need to determine how you are going to reduce that burden in a way that works for you, not the CRA.

    Yes, the CRA does offer some programs that remove penalties and interest, such as:

    1. The Taxpayer Relief Program – intended to provide relief of penalties and interest to those who can prove that an extraordinary circumstance led to their tax problem.
    2. The Voluntary Disclosure Program – offers a second chance to change a tax return you previously filed or to file a return that you should have filed.

    Keep in mind that these are complicated programs to apply for. Furthermore, where relief is concerned, it is difficult to get CRA approval for even partial relief of penalties and interest.

    Even if CRA agrees to cancel some or all your penalties and interest, you will still be left with a tax debt. Plus, the CRA never makes settlements on tax principal.The only question at this point is: can you pay the tax debt? If you can, then pay it.

    If you cannot, then the problem is a much bigger one.The CRA will collect one way or another, there is no way around that fact.

    The only way that you can get rid of CRA penalties, interest, and potentially reduce the principal tax debt you owe is through a consumer proposal or bankruptcy. Both will also protect you from disastrous enforcement action or stop it if it has already been put in place.

    When exploring either option, keep in mind that consumer proposals and bankruptcies must be administered by a Licensed Insolvency Trustee (LIT). Why is this important? Because LITs do not represent you. They represent your creditors, and therefore will be doing everything they can to collect the most for the creditors. Once you share your personal and financial information with an LIT, they may be able to find ways to go after more of your money and assets.

    Protect yourself and your information by always seeking out your own professional financial advice to explore all your options before going to a LIT.

    At DebtCare, we want to help you become debt free.

    Get in touch to discuss the best option for you by calling 1-888-890-0888.

  • CRA Tax Debt? Is a Voluntary Disclosure Application the Answer?

    Did you know about the Canada Revenue Agency (CRA) Taxpayer Relief Program for tax debt relief? If you have a CRA tax debt you’re likely pretty stressed about it, but don’t worry, you are not alone. Dealing with a tax debt takes work, but in order to avoid further aggravating the issue, it is something you need to do right away.

    Maybe you’ve already considered applying for the CRA’s Taxpayer Relief Program. This program gives taxpayers the opportunity, under certain conditions, to apply for relief of interest and penalties. Since penalties and interest on a CRA tax debt grow very quickly, this is an important resource.

    Tax debt may leave you feeling hopeless, but just remember: you’re not breaking the law simply because you owe money to the CRA. Just don’t ignore the problem either, hoping it will go away. CRA is mandated to act within their means to get the taxes you owe, and they can utilize all available enforcement tricks and strategies to do so. If you’re not careful, this can easily leave you in a financial mess.

    What types of enforcement action are we talking about? Wage garnishments, frozen bank accounts, even property liens, are all popular options for the CRA. Each one, however, has the potential to leave you feeling strapped.

    What options do you have? Enforcement action can be avoided if you have the means to pay the CRA in full. If you don’t, it is time to consider what other avenues are open to get the tax debt dealt with.

    Bankruptcy – If you have a tax debt in addition to a mountain of other debt, filing for bankruptcy may be the smartest solution. Doing so provides you with the ultimate fresh start – one you know you can achieve in as little as nine months.

    Consumer Proposal – A consumer proposal is another option. If your personal debt, including your tax debt, is significant, a proposal to all creditors may result in a decreased total owing, a definite payback period, and no interest.

    What’s important to keep in mind with both of these options though is that you want to have someone in your corner at all times. An experienced debt consultant has the knowledge and expertise to assess your unique situation and help you determine the best course of action to suit your current needs and future goals.

    When you have a CRA tax debt, the best thing to do is work with a qualified financial professional to know your options and make the wisest choice.

    Call DebtCare today at 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.