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  • Missed the Small Business Tax Deadline? Canadian Tax Penalties, Interest and Options!

    debtRunning a business is tough! Most small business owners are experts in their individual trades, but not necessarily experts in all aspects of business – or other businesses for that matter. For example, you may know how to unclog a toilet, or even install one, but you wouldn’t necessarily want to take on the task of outfitting the plumbing for an entire house. The same is often true when it comes to taxes; many small business owners are well versed in their own finances, but when it comes to their taxes, GST/HST and payroll deductions, etc., this can represent a whole different level of accounting know-how.

    When the small business tax deadline passes, there are always a significant number of individuals who have missed it. Most often, small business owners miss the deadline for 5 reasons:

    1. Unsure of when it was
    2. Procrastinated on hiring someone to come in and prepare the books and returns
    3. Think that money will be owed and are not sure how it will be paid
    4. Missing some type of information, proof of expenses are just one example, and so don’t think that their return can accurately be prepared
    5. Think they will not owe and thus the deadline is more of a guideline…

    If you are a sole proprietor or part of a partnership in Canada, the small business tax deadline was in June. We are now officially past that date, and so, if you have not filed, you’ve missed it.

    If you missed the deadline, the following are the financial penalties:

    • If it is your first time filing late the penalty is up to 5% of the amount owing plus 1% per month for up to 12 months.
    • If you filed late in any of the preceding 3 tax years the penalty is up to 10% of the amount owing and then 2% per month for up to 20 months.
    • Keep in mind that interest is back-dated to the tax year, and accrues on both the principal and penalties!

    If you missed the tax deadline, this is considered tax evasion and you could also be subject to criminal prosecution and further financial penalties. Owing money to CRA is not tax evasion, but failing to file is! One will lead to financial challenges, while the other could land you in court.

    Often, late filing and tax avoidance is due to an underlying financial problem and an inability to pay. If you missed the small business tax deadline the best course of action is:

    Step 1 – Get your books and returns prepared. If you don’t have receipts or other documentation, tell the accountant and they will tell you what you can and cannot include in the return.

    Step 2 – Once the return/returns are prepared you will have a better idea about what you owe and can use the numbers above to estimate penalties. Be realistic about your finances. Consider CRA debt, other debt you have and what assets you want to protect.

    Step 3 – Meet with a financial professional before you file to get a game plan in place for dealing with what you will owe to mitigate the blow-back of collection problems.

    If you are worried about filing late and considering not filing at all because of a looming tax debt, our advice is to file right away to avoid a tax evasion charge, then deal with the debt with professional financial help. Call DebtCare Canada at 1-888-890-0888.

  • Does a Consumer Proposal in Canada Stay on Your Credit for 7 Years?

    debt care1Many people choose a consumer proposal in Canada to get finances back on track. These represent a great debt relief option because you can settle your debt, often reduce the total balance to be repaid, freeze interest and consolidate the various monthly bills into one single, monthly payment.

    Of course, as with any debt relief solution, there are implications for your credit, and we are often asked what those implications are. Many individuals come to us with a fear that a consumer proposal will ruin their credit for the long term, and leave happy knowing that this isn’t actually the case. Often the pros far outweigh the cons, especially when you consider the fact that your credit is likely already not so stellar – coupled with the fact that a CP can save you thousands of dollars and stop self-serving creditors from continually harassing you.

    When it comes to consumer proposals, by far the question asked most often is “how long does it stay on my credit report?” The answer is fairly simple, but the length of time really depends of you. Many think that a CP is just like a bankruptcy – on your credit report for 6 years following the date of discharge – but this is not the case.

    In a nutshell, a proposal is on your credit for 3 years from the date it is paid off in full. The faster you pay off the proposal, the faster it is off your credit report.

    Here is a handy chart to help show you how to calculate how long a CP will be on your credit:

    Paid of immediately On your credit report for 3 years overall
    Paid off one year after filing On your credit report for 4 years overall
    Paid off two years after filing On your credit report for 5 years overall
    Paid off three years after filing On your credit report for 6 years overall
    Paid off four years after filing On your credit report for 7 years overall
    Paid off five years after filing On your credit report for 8 years overall

    A consumer proposal in Canada is not like bankruptcy where you have an ongoing obligation to your trustee pending a discharge. Once creditors agree to a proposal, it is binding and can be paid off at any time. Or, you can choose larger monthly payments to get it paid off faster – the choice is up to you and your own personal situation.

    Once you have negotiated a proposal and it has been accepted, start rebuilding your credit quickly with a secured credit card. This will help you establish good credit behaviour and show future lenders that you are committed to getting back on track.

    Also, make sure that you stay on top of your credit report. Ensure that the credit reporting agencies are aware that you have filed, and also that it has later been paid off – don’t just assume that they have been made aware. Consider sending letters of discharge through registered mail.

    Rather than being a credit rating killer, a consumer proposal is actually a great way to begin the process of getting your credit rating back on track. By consolidating all payments and reducing principal, you can get back on your feet, and don’t have to worry about long term impacts.

    For more about filing a consumer proposal in Canada, or to discuss other options for debt relief, call DebtCare Canada today at 1-888-890-0888.

  • Your Rights: Canada Revenue Agency Collections Policy

    debt careWith this year’s tax deadline long gone, for many individuals, the stress that comes with income tax filing is also long forgotten. However, if you are one of the many Canadians now stuck dealing with a tax debt, the stress may just be in its infancy, growing exponentially as the days pass and interest continues to accumulate. How well do you know the Canada Revenue Agency collections policy?

    Of course the Canada Revenue Agency has a right to their money, but that does not mean that you don’t have rights as a taxpayer. The CRA is a very powerful organization, and often that power means intimidation and fear – just know that you do have rights and can fight the CRA if you so choose.

    Taxpayer Bill of Rights. This is a set of rights established to protect the taxpayer when it comes to things like language, privacy, harassment, objections, etc. For example, if you feel as though you are being unfairly treated, you are able to file a formal complaint under the Bill of Rights. Intimidation is a tactic that often works, but largely because people are unaware that avenues for recourse exist.

    Here is a link to the CRA website and the Rights in their entirety:

    http://www.cra-arc.gc.ca/rights/.

    Additionally, when it comes to a tax debt, individuals are often not aware of the programs that exist to help fight CRA collection action, actions such as a wage garnishment, frozen bank account, or property lien. These collection actions can cause extreme financial hardship and getting them lifted can be a challenge. Some of these programs can also stop interest and penalties. For example, the Taxpayer Relief Program or even the Voluntary Disclosure Program may give you the chance to deal with what you believe are tax debts leveraged as a result of personal circumstances which prevented you from filing or impacted your ability to pay.

    Just remember, any negotiations you enter into directly with the CRA can have negative impacts long term; often in exchange for a repayment plan the CRA will require personal information, information that will later be used against you! The CRA will never voluntarily negotiate to reduce principal, and typically this can only be achieved through a consumer proposal or bankruptcy.

    If a CRA tax debt has you feeling anxious and overwhelmed, our advice is NOT to call directly to negotiate, but rather to speak first with a debt counsellor with the experience and knowledge that will help you protect yourself. Call DebtCare Canada today at 1-888-890-0888.

     

  • Filing a Consumer Proposal in Canada – Does it Make the Most Sense for You?

    shutterstock_53579857The frequency with which Canadians are filing consumer proposals in order to get back on solid financial ground has increased significantly in the last few years. The reason is fairly obvious; the ability to stop collection action, halt interest, combine all payments into one, and often to negotiate for a smaller repayment amount, make filing a consumer proposals in Canada a very attractive debt relief option.

    However, because a consumer proposal is a solution for dealing with financial problems, some assume that individuals on the lower end of the income scale with limited assets are the most likely candidates for a proposal. It is actually quite the opposite – often consumer proposals in Canada are filed by higher income earners.

    Why? A major factor is the fact that, a few years ago, bankruptcy laws in Canada changed.

    Higher income earners – Now there is an income and expense calculation (which is very low by the way) that looks at whether you earn more than a basic amount. If you do, 50% of any additional income is surplus income in a bankruptcy, so a higher income earner ends up having massive monthly payments. Also, if you have surplus income, you have to make monthly payments in bankruptcy for 20 months as opposed to 9 months (the limit if you are under the income/expense limit).

    Homeowners – Believe it or not, in bankruptcy and in consumer proposals, many people are able to keep their homes! In a bankruptcy though, home equity is considered surplus income and so 50% of that equity has to be repaid. Instead, many homeowners opt for a proposal because it is a negotiated settlement so there is room to negotiate that less equity be repaid.

    In a consumer proposal, you offer your creditors a sum that you will repay that covers all unsecured debt. As soon as a consumer proposal is filed, the creditors have a specified amount of time to accept or reject. Creditors who don’t answer are considered as accepting. As long as creditors representing 51% of the debt accept, the proposal goes through.

    If accepted, the person has to make a minimum payment equal to the amount of the proposal divided over 48 or 60 months. That said, a consumer proposal can be paid in full at any time which also makes it more attractive to higher income earners, especially those who get large annual bonuses.

    An additional reason for the attractiveness of a proposal is the impact it has on your credit rating. If paid off within 1 month to 3 years, a consumer proposal ends up being on your credit less time than a bankruptcy.

    If you are struggling with debts and the threat of collection action, call DebtCare Canada today. Filing a consumer proposal may just make the most sense for you! 1-888-890-0888.

  • You Can Stop a Wage Garnishment in Ontario – Here Are Your Options!

    wage garnishment in OntarioWage garnishments impact thousands of people every day – and can come as a most unpleasant surprise for those individuals.

    Beyond the financial implications, a wage garnishment in Ontario can have serious consequences in other areas of your life. For example, if you work for someone else, once that individual receives a Notice of Garnishment regarding the wage garnishment, they will be fully aware of your financial problem and thus may view you in a different light. Responsibility and reliability may be questioned, and any company that required a credit check upon hiring may take this new information into consideration.

    If you work for yourself, especially with a small company, your reputation is important, but if your clients are receiving letters telling them to submit payment directly to the court, this could tarnish that reputation. The hassle may cause those clients to look elsewhere in the future.

    Once a garnishment is in place, is paying it off the only option? Perhaps not.  A wage garnishment in Ontario can often be stopped but this largely depends on who issued it.

    Here are a few of the most common types of wage garnishments in Ontario:

    1. Issued through the court – someone sued you, got a judgement and is enforcing it. Generally this can mean a loss of up to 20% of your earnings, and can only be stopped by paying the debt or making an arrangement with a creditor, by court motion, or by arranging a bankruptcy or consumer proposal with a debt counsellor.
    2. Issued by the CRA – the CRA does not need a court order, and can garnish up to 50% of your wages. If you are self-employed or on a pension this could be up to 100%. A CRA wage garnishment can only be stopped by: CRA’s consent or an arrangement, by arranging a bankruptcy or consumer proposal with a debt counsellor, or by taking CRA to tax court (the most expensive route). A CRA wage garnishment is particularly nasty….
    3. Issued by Family Responsibility – the only way to deal with one of these is to pay it in full or go back to court – there is no other option.
    4. Issued because of EI overpayment or by government after receiving money under false pretense – this can be complicated and these are instances where it is difficult to get protection. Like the CRA, this does not require a court order and if fraud is involved it can get tricky.

    When you are facing a garnishment of your wages, no matter the source, your best bet is to speak with a debt counsellor. The solution to your financial problem will largely depend on your personal circumstances, but ignoring the garnishment should never be an option.

    Avoid the embarrassment and financial hardship of a wage garnishment in Ontario by calling DebtCare Canada today at 1-888-890-0888.

  • Rebuilding Credit: Bad Credit Rating Doesn’t Always Just Disappear After a Few Years

    rebuilding credit pngIt is a very common misconception that bad credit just “disappears” once debts are paid and your credit behaviour improves. However, past credit activity doesn’t just evaporate into thin air with a few months (even a few years) of good behaviour. Rebuilding credit takes some work.

    For example, if you file for bankruptcy in January of year one, pay on time, every month, and are discharged in January of year 3, that bankruptcy will remain on your report for 6 years following the date of discharge (January of year 9) – not from the time that you declared.

    When it comes to consumer proposals, these stay on for 3 years following payment in full, as does any credit counselling.

    Periods of inactivity can also impact your credit rating. For example, if a lender assigns debt to collections, this results in activity, and negative activity at that. However, if you don’t have any activity, this is not necessarily a good thing either.

    When it comes to activity, a tip is to continually use credit and to repay that credit on time, all the time. A secured credit card is a good way to do this without being tempted to start relying on credit again or getting back in over your head.

    So, if you have bad credit and want to clean it up, here are a few steps you can take to get the process started:

    • Step 1 – Get your credit report and see what it says. These are available online from both Equifax and TransUnion. Some lenders use one, whereas some look at both.
    • Step 2 – Deal with the bad credit debt on your credit report by paying it off. Better yet, settle it for far less than you owe with a consumer proposal to stop interest and reduce overall amounts.
    • Step 3 – Document EVERYTHING. Any time you settle a debt, get a letter re: settlements and arrangements and copies of proof of your action. It can take some time for these payments to register, but keep on top of it.
    • Step 4 – Make sure the credit reporting agency knows these debts have been paid – don’t count on your lender to tell them. Send the above noted documents via registered mail to ensure they reach their intended destination.
    • Step 5 – Begin the process of rebuilding. Consider a secured credit card to show you are committed to maintaining positive history.

    When it comes right down to it, the only way to improve a poor credit rating is to pay your debts and allow time to pass to show that your payment habits have improved.

    For more information about how to rebuild your credit effectively, call DebtCare Canada today at 1-888-890-0888.

     

  • How to Stop Collection Calls to Your Workplace

    stop collection callsThe collection industry has come a long way since the unregulated days when collection agents could basically do and say whatever they wanted.

    However, even with the changes that protect consumers, one popular tactic that collection agents still deploy is calling you at work! Why? For obvious reasons: maybe you were able to avoid their call at home, but at work it is more difficult. It is also because it is so incredibly embarrassing to receive collection calls at work that some people are just mortified and pay.

    If you can’t pay though, it is entirely unfair that you suffer this kind of humiliation.

    If you have the type of job where the state of your personal finances is important as a testament to how responsible you are, an employer catching wind of financial problems could also interfere with your job.

    So, how do you nip an aggressive collector repeatedly calling you at you in the bud?

    • When agents call, advise them that they do not have permission to call you at work and should they call again you will file a complaint with the appropriate regulator.
    • Write them a letter advising them where they may call and/OR write to you – we put OR in caps because it is an option to tell them they cannot call you at all and may only write to you.
    • If they continue to call, you may file a formal complaint against them with the provincial regulator.

    If you know that you plan to go as far as making a complaint against the collection agency be diligent and keep good records. Note the dates and times of calls, who called you, what happened – what did they say to you and what did you say to them.

    When you are ready to make a complaint, here are some links to some provincial regulators of collection agencies in Canada:

    Now, stopping the collection agency from harassing you at work is a good first step, however it is not going to make the debt go away. Continue to ignore them and the agents may just look at other ways to collect from you or your creditor may decide to pursue you through small claims court.

    Stand up for your rights and don’t be bullied by a collection agency, but don’t ignore the debt in the process. Make finding a solution for dealing with the debt a serious priority – that is the only way that you can truly put an end to your problem.

    For more about your rights when it comes to collection agencies, or to get rid of the debt to make the harassment stop, please call DebtCare Canada today at 1-888-890-0888.

  • Can a Collection Agency Garnish my Wages?

    Can a Collection Agency Garnish my Wages?

    collection agency, garnish my wagesNo one wants to be unable to pay their bills. For most it is devastating to reach a point where you simply can’t afford your obligations to a creditor, causing you to default and forcing your creditor to assign your account to third party collections.

    When the collectors start calling they mean business. They have one goal and one goal only, and that is to collect money on behalf of your creditor. Some may even threaten to garnish your wages, leading you to wonder, “can a collection agency garnish my wages?”

    Answering this question means taking a closer look at collection agencies, their powers and the regulations governing them.

    In Ontario, collection agencies are regulated by the Ontario Government and have to adhere to guidelines in terms of what they can and cannot do when collecting a debt.

    Here are some examples of things collection agencies can’t do:

    • Contact you on a Sunday, except between 1 p.m. and 5 p.m.
    • Contact you on any other day of the week between 9 p.m. and 7 a.m.
    • 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 a collection agency crosses the line you can file a complaint against them here: https://www.ontario.ca/home-and-community/collection-agency-your-rights.

    Getting back to collection agencies and wage garnishments: in order for your creditors to be able to garnish your wages in Ontario, they must first sue you in small claims court, obtain a judgement against you and then gain permission from the court to garnish your wages.

    In small claims court your creditor can represent itself or hire a third party agent as its representative. A paid agent must be a paralegal licensed by the LSUC.

    The only way that a collection agency can garnish your wages on behalf of a client is if they have a division that includes licensed paralegals who may administer small claims court documents and filings and if:

    • The company has been engaged to represent the creditor to sue you in small claims court.
    • The file was assigned after the creditor already had a judgement and it simply hasn’t been enforced.
    • They are representing an arm of the government that doesn’t require a court order to garnish – but in this instance it is more likely that the government would directly garnish your wages.

    If a collection agency threatens to garnish your wages:

    • Ask them to put their threat in writing.
    • Ask for written evidence that they have been engaged by the client to take legal action or enforce a judgement against you.
    • Contact the small claims court to confirm if there has been a judgement filed against you.

    While you have some leverage as far as asking for transparency and standing up to the collection agencies, eventually you are going to have to look at ways to address the root cause of your challenges -which is the debt that you can’t pay. The cycle will only continue because, after a certain amount of time, the creditor may assign your account to another collection agency and then another. Some collection agencies do have legal departments and paralegals on staff, so while most won’t garnish your wages on behalf of a creditor and may merely threaten, others do have the power to do so.

    Know your rights about what collection agencies can and cannot do – but don’t ever ignore a debt that has gone to collections. Call DebtCare Canada today – we will help you get the relief you need: 1-888-890-0888.

  • Contractors – The 2015 Tax Deadline is Approaching

    2015 tax deadlineA great deal has changed in the working world with the boom in “contracting”. It used to be that companies would hire workers and pay them as employees. This has changed dramatically over the past 20 years. By contracting a worker, employers no longer have those strings, responsibilities and obligations that come with having an employee.

    Where contractors are concerned, a job is a job, however contract positions can prove to be a major headache when tax time comes if you are not good about keeping your books.

    The 2015 tax deadline is approaching – are you ready? If this is your first year filing as a contractor, here are some tips:

    • Try your best to organize your receipts and invoices.
    • If you haven’t been saving them, request bank statements and credit card statements. This will at least show deposits and give you an idea of what you spent.
    • Find a bookkeeper. If your receipts are all in a pile, or in a box, or worse, you don’t have any, a bookkeeper is your cheapest solution. If you bring your box of loose records to an accountant you will likely pay more to have them organized than you would through a bookkeeper.
    • If you have not registered a business, make sure that you get a T2200 from your employer. The T2200 allows you to claim personal expenses in accordance with your job.
    • Make sure that you have collected your T forms. If you are a contractor likely your employer will give you a T4A, but there are other T slips to consider. If you are in a union they will issue a T slip for your union dues, which are tax deductible. There may also be another T slip from the company that contracts you or from the union if you are in one related to taxable benefits (which are monies you may have received which are taxable).
    • Make sure you consider all expenses you incur to fulfill your contract – and do not write off things you are not entitled to. So many people do this and this will land you in real trouble with CRA later.

    Our next major tip regarding the upcoming June tax deadline: don’t miss it! If you miss it and this is your first time filing late you will pay a 5% fee on the amount that you owe, plus 1% per month for up to 12 months. Interest will accrue on top of both the tax debt and penalties.

    If you filed late in the 3 years preceding this year the penalty may increase to 10% of the amount of the tax debt, then 2% per month for up to 20% plus interest.

    If you are currently behind a couple of years filing, now is a better time than ever to get compliant! Did you know that you can’t claim HST input tax credits more than 4 years retroactively? This is a huge incentive to get filing in order.

    Now, add to this the fact that not filing your tax returns is tax evasion and could land you with a criminal problem, and tax time turns into a nightmare! Don’t believe us? Look how many people have already been prosecuted this year alone for tax evasion http://www.cra-arc.gc.ca/nwsrm/cnvctns/menu-eng.html.

    Typically people avoid filing tax returns for 3 reasons: 1)They don’t think that they are going to owe 2)They know they will owe and want to buy time 3)They have no records and don’t know how to go about filing.

    If you are coming up to the June deadline and fall into the second or third groups, you should seek out professional guidance ASAP. A tax debt is a financial problem with severe consequences. You can’t ignore it because it won’t go away by itself and the more time that passes the greater the consequences.

    Fortunately there is still time! Call DebtCare Canada today and we can help you get those tax debts straightened out: 1-888-890-0888.