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Category: Tax Debt

  • Trying to Negotiate with the CRA is a Dangerous Game

    We are officially reaching the end of the 2017 tax season, and that means that most Canadians have completed filing and many are patiently waiting for their refund cheque in the mail. If, however, you’ve yet to file because you know a tax debt is headed your way, or have filed and have your assessment in hand, you’re probably at the other end of the spectrum. Your first thought may be to call the Canada Revenue Agency directly and attempt to negotiate a payment plan, but we urge you to read on and reconsider that approach. Trying to negotiate with the CRA is a dangerous game – one that can land you in a heap of financial trouble.

    The CRA is well-known for their oft-nefarious tactics for collecting what they believe is owed. When you have a tax debt, the CRA is not interested in a long term payment plan with low monthly payments, and this is primarily why it is so dangerous to call.

    When you initially call the CRA to negotiate a payment plan, things may not seem so bad. Agents are encouraged to cultivate a ‘friendship’ with you in the hopes that you will willingly share as much financial information as possible. This is usually accomplished with a financial disclosure form. In this form you’ll be asked questions about your income, where you work, where you bank, where you live and your current financial obligations. Don’t be fooled – the CRA is not asking for this information to help create a payment plan that suits your current financial situation.

    Once you’ve provided this information, the CRA may agree to accept a temporary payment plan, but once this payment plan expires, that ‘friendship’ will also expire. Now that the CRA has all of your financial information, the new payment plan will take into account none but the most basic living necessities (all other creditors will be subtracted from the equation) and you’ll be facing a monthly payment far and above what you can reasonably afford to pay.

    What if you don’t pay? Thanks to that financial disclosure form, not paying isn’t really an option. Not only does the CRA now know all about your finances they also know where you work, bank and live, making wage garnishments, frozen bank accounts and property liens that much easier to obtain.

    So, if you shouldn’t be calling to negotiate directly with the CRA, what options are available? Unless you can pay the debt in full, speak with a financial consultant to discuss the various options available to clear the debt before enforcement action is levied against you. Once this happens, things are going to become much harder to navigate.

    At DebtCare, we know how difficult the CRA can be to deal with. We also know how to protect you when it comes to dealing with a tax debt.

    Get in touch today by calling 1-888-890-0888.

     

  • Protecting Your House When You Have a Tax Problem

    Tax season is officially upon us, and many Canadians have already filed or have at least started the process. While a bit of a hassle, it is usually not accompanied by a great deal of stress. However, if you are like one of the countless individuals sitting with the knowledge that a tax debt is looming once you file, or if you’re still dealing with a tax problem from previous years, stress is likely something you are dealing with on a daily basis. Today we talk about how to protect your home when a tax problem is hanging over your head.

    If you own your home and have a tax problem, you really do have to act fast. You need to have a plan to deal with the debt before it becomes a major issue.

    Why? The Canada Revenue Agency is very strict when it comes to obtaining money owed. Enforcement action is very common, and when you own your own home a property lien is an effective method to achieve this. Once a property lien is in place, it becomes very difficult to access any equity to secure a loan, the CRA becomes a secured creditor, meaning a proposal or bankruptcy becomes more difficult, and if you choose to sell, they get your equity to cover the tax debt.

    When there is no lien you have options:

    Refinancing your home to pay the tax debt is an important option to consider. Accessing the equity you currently have may give you the ability to cover a significant debt, thereby avoiding enforcement action.

    If you don’t have enough equity, or your credit will not support a refinancing of your home, a consumer proposal or bankruptcy may be good to consider. Both can help you deal with a tax problem before it balloons.

    What about transferring the home into someone else’s name – won’t that solve the problem? No! Doing so will only transfer the tax debt to that person. The CRA uses Section 160 of the Income Tax Act on a regular basis against those who attempt to avoid a tax problem in this way.

    Protecting your house means acting fast and looking at what you can leverage now to deal with the tax problem is crucial. As mentioned, the moment the CRA places a lien on your home, your options decrease exponentially.

    When a tax problem has you losing sleep, get in touch with DebtCare. We can help you get the debt sorted and help you protect your home in the process.

    Call 1-888-890-0888 today.

     

  • What to Do if You Have a Large Tax Debt That You Can’t Pay

    Many of us have been there; sitting with a major tax debt with no foreseeable way to pay it off. This is a common and incredibly stressful situation to find yourself in. The Canada Revenue Agency is ruthless, and when money is owed, you can’t ignore the issue. This week we discuss what you can do if the CRA is knocking on the door and you don’t have a way to pay.

    First of all, what will the CRA do if you can’t pay? The CRA isn’t interested in considering why you can’t pay. Instead, they will take enforcement action as soon as they feel it is prudent. This may include a wage garnishment, a frozen bank account or even a property lien. These are serious actions that can cause significant stress financially.

    Furthermore, the CRA does not require a court order to levy such enforcement action, nor are they required to notify you prior to putting one (or all) in place.

    So, what can you do to deal with a large tax debt if you don’t have the funds to pay it in its entirety?

    One option you may want to explore is taking advantage of the equity you have in your home. If you own your home and have paid off a significant amount, this may be easily done. However, if you don’t own your home, don’t have significant equity or have bad credit, this option likely won’t be open to you. Also, if the CRA has placed a lien on your home as a result of the tax debt, your ability to take this route is greatly reduced.

    Obtaining a personal loan may also be an option. This way you can break down the large debt into manageable monthly payments. However, as with accessing home equity, if you have bad credit you may not quality or will only qualify at a very high rate of interest.

    A consumer proposal or bankruptcy may be another option. These two represent an important option for those with debts aside from the tax debt. Both of these options can not only lower the overall debt, you can also stop worrying about interest accumulating. Both will also stop any current enforcement action the CRA (or any creditor) has taken against you.

    The best thing to do if you have a large tax debt is to formulate a plan. A good financial consultant, hired by you – not your banker or a trustee – can help by looking in depth at your finances and examining the different scenarios that are available to deal with your tax debt.

    A skilled financial consultant should understand financing options such as mortgages and lines of credit, insolvency (proposals and bankruptcies) and also CRA policy. They should be able to help you plan and administer the decided upon solution. You can also count on them to remain in your corner, protecting your interests throughout the entire process.

    If you have a large tax debt and can’t pay, time is not on your side. The longer you wait to deal with it the more leverage the CRA gains.

    Don’t wait. Call DebtCare today at 1-888-890-0888.

     

  • Tax Problem Tips – Is the CRA Friend or Foe?

    The tax season is just a few short months away, and that means, Canadians are getting ready to break out the calculators. If you’re on top of your taxes, a few days of hassle are quickly followed by a year of not worrying. However, if you owe a tax debt, or are nervous that one will be hanging over your head once you’ve filed, that year of not worrying may seem like a pipedream. This week we’ve got some tax problem tips to help you better deal with any issues.

    First of all, it is important to note that the Canada Revenue Agency is not in your corner. No matter how nice the agent assigned to your case may seem, they are not your friend. When you call to settle a tax debt, hoping for some mercy, the agent may at first seem sympathetic, but don’t be fooled.

    The first thing they will likely do is tell you that they will consider an arrangement with you once you’ve completed a financial disclosure form. This is a dangerous CRA form that requires information about your income, expenses, assets and liabilities. It will also ask you to provide information about where you work, live and bank. Often people will complete this form in good faith, assuming that once the CRA understands how much money you take in each month, compared to your current financial responsibilities, they will accept an arrangement based on what you can reasonably pay.

    This could not be further from the truth.

    What most Canadians don’t know is that the CRA will only consider your basic living expenses after seeing your budget and disallow payments to other things like credit cards. They will decide, based only on those basic living expenses, what you should have left over and often request a monthly payment so high that it will be impossible to pay.

    Additionally, sometimes they will accept your arrangement temporarily. The CRA is not looking for a long-term arrangement, and thus once your arrangement ends or if they deny you an arrangement, they will use all of the personal information you disclosed in the financial disclosure form against you! Then they will resort to collection action, including garnishing your wages, placing a lien on your home, or freezing bank accounts, to get what is owed.

    Before you complete one of these dangerous CRA forms or consider trying to negotiate with the CRA – have an independent review of your finances done by an independent financial consultant, hired by you to get an opinion as to your next best steps. Not only will they be able to help you anticipate what steps the CRA will take, they can also help you come up with a financial plan to deal with the tax debt so that you don’t get yourself into deeper trouble with CRA.

    Protect yourself. Call DebtCare first. 1-888-890-0888.

     

  • HST Input Tax Credit Alert: If You’re Behind Filing, 4 Years is Your Limit

    debt11If you own your own business, you know that your HST input tax credit can be a valuable resource financially. As a GST/HST registrant, the ability to recover the GST/HST you paid or owe on purchases and expenses related to your commercial activities by claiming input tax credits can be a big help, especially when you owe a tax debt.

    That being said, many business owners fall behind filing their HST returns for a variety of reasons, most often disorganization, lost receipts, or even the knowledge that a debt will be owed and the funds to pay are unavailable.

    What most business owners are unaware of, however, is that after 4 years you can’t claim input tax credits. Since these can reduce your overall tax debt, it is important to file within this limited timeframe to reap the benefits of this resource.

    As mentioned, one of the most common reasons individuals hold off claiming the HST input tax credit is because they know they will have to pay. If you are in this position, and are worried that even if you take into account input tax credits, you still can’t pay, then you have to look at the other options available for payment.

    Why not just leave it unfiled? Well, HST is trust money so the Canada Revenue Agency is that much more aggressive when it comes to collecting. They will want to be paid in full right away, or over a very short term.

    What you can do:

    Do you have the ability to pay in full, or over a 6-month term? If so, then you don’t have a problem. Negotiate a payment plan and wipe the debt clean.

    Do you own a home with equity? If so, perhaps using that equity to refinance and get a mortgage to pay the tax debt makes the most sense. A second mortgage, structured more like a loan than a mortgage with an amortization period of 20-25 years, can mean a small monthly payment that settles the debt and gets the CRA off your back.

    However, if the answer to these questions is no, you may want to talk to a financial counsellor about government programs that you can leverage to protect yourself from CRA enforcement while they negotiate a payment arrangement you can afford.

    At DebtCare, we have the knowledge and experience that makes settling that debt simple.

    Want to discuss all of your options? Call us today at 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.

     

  • Missed the 2015 Tax Deadline – Here is what to expect next

    debt1April showers have brought May flowers…but if you missed the 2015 tax deadline this month may also bring with it a tax debt, accompanied by penalties and interest. When it comes to penalizing Canadians for late filing, the Canada Revenue Agency doesn’t fool around – and you shouldn’t either.

    In Canada, the 2015 tax deadline was April 30th, and if you, like many others, missed it, here is what you can expect:

    • If you owe for 2015 and didn’t file on time, you can expect to be charged a late-filing penalty of 5% of your balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
    • Additionally, if you missed the deadline and were charged a late-filing penalty on your return for 2012, 2013, or 2014, your late-filing penalty for 2015 may be 10% of your 2015 balance owing, plus 2% of your 2015 balance owing for each full month your return is late, to a maximum of 20 months.

    Once penalties are leveraged, they will continue to accumulate and then interest is added to the debt and the penalties. You can also expect, once that assessment arrives in the mail, to start receiving notices to file your returns and pay the debt.

    Not filing is not an option. If you choose not to file, you can be pursued for tax evasion and the CRA can arbitrarily assess you. This is done by looking at your current occupation and making an income estimate based on the industry standard. If you are assessed a debt based on the income the CRA thinks you earned, penalties and interest will also be applied.

    So you file, but still don’t pay the debt. The next step the CRA will take is to levy collection action, which may include a frozen bank account, a wage garnishment, even a lien on your property.

    When it comes to stopping collection action, or avoiding it altogether, your best bet is to pay the CRA in full. If the amount is not readily available, you may consider refinancing your mortgage or obtaining a personal loan. Another option may be reaching an agreement on repayment, but the CRA is not interested in lengthy terms – it wants to be paid back as soon as possible.

    If you can’t pay, and owe enough that you would not reasonably be able to make payments to pay off the debt, in full, in 12 months, move on to plan C – in a situation where you have no assets or you have assets that have no equity, a consumer proposal may be the best option. It will result in a single payment, halted collection action, halted interest accumulation and often is the only way to reduce the principle on a tax debt.

    If you are interested in discussing your options, DebtCare is here to help. We know what the CRA wants to see with regard to repayment or consumer proposal settlements and can help you achieve the best results.

    Call us today at 1 (888) 890-0888.

     

  • CRA Collections Calling You at Work? How to Stop it Now!

    debt1Spring is fast approaching, and that means the snow may still be holding on but it is getting weaker and weaker. With winter on the way out, that means the tax season is just around the corner. However, if you are currently sitting on a tax debt, you may be months into your tax season, dealing with CRA collections on a regular basis.

    If you owe the Canada Revenue Agency, be it from the 2014 tax year or earlier, you are likely well aware of the fact that these agents do not give up. CRA collection agents are relentless, and will try at every turn to obtain any money they believe is owed to them. This may involve calling you at home, bombarding you with official letters, or even calling you at work, which is never good for business!

    Can’t these phone calls be stopped? There is a Taxpayer Bill of Rights that addresses harassment, but as long as agents are following it they can still use tactics that are embarrassing and may feel harassing (even if they are not actually considered harassment). The only real way to stop the phone calls is to deal with the debt.

    So, what are your options?

    1. Pay your debt in full. We hope that if this were an option you would have already taken it, since interest accrues at an alarming rate on a CRA debt. If you’ve been holding out in the hopes that the debt will just disappear rather than dipping into the savings account, we strongly urge you to reconsider.
    2. Get a loan to pay the debt. If you only owe a small amount, this can work, but often tax debts are massive, in which case an affordable monthly payment may be impossible.
    3. Refinance your house to pay the debt. Many people do this, as it is a viable option, usually with lower interest, but you need to do it before a lien is placed on the home (a very common enforcement action taken by the CRA).
    4. Consumer proposal. If refinancing is not an option, and a loan doesn’t make sense, you may want to consider a consumer proposal to get rid of the debt. This will mean one payment, a stop to interest, a stop to collections and sometimes an overall reduction of the debt.

    So what is the best option for you? If you want to stop CRA collections, the best option depends on your unique circumstances, and this is best determined after a consultation with a financial specialist. Someone with the expertise and experience working with CRA collections and tax debts can help you determine the best route for success.

    At DebtCare, we can help you find that route. Call us today at 1-888-890-0888.