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  • The Canada Revenue Agency Consequences of Missing the Income Tax Deadline

    In Canada, this year’s Canada Revenue Agency (CRA) income tax deadline was April 30th, 2012. The CRA’s income tax deadline is the last date that individual Canadian taxpayers can file their annual income tax returns with the CRA without incurring penalties and interest. Corporations are not subject to this deadline and have their own year-end filing dates.

    If you file your income tax return after the income tax deadline of April 30th, 2012 and you owe tax, the amount that you owe will be subject to interest and penalties. Penalties and interest are calculated based on the length of time it took for you to file following the tax deadline.

    The Canada Revenue Agency will apply a penalty equal to 5% of the balance owed. For the next 12 months, an additional 1% will be owed each month that passes that your tax return is late. Repeat offenders (those who filed their income tax returns after the income tax deadline in 2008, 2009 or 2010) could be subject to a penalty of up to 10% and for the next 20 months, an additional 2% of the balance owing for 2011 for each month that your income tax return is late.

    Penalties and interest are calculated separately. If you miss the income tax deadline, the Canada Revenue Agency will charge you daily compound interest beginning May 1, 2012 on any amount owing for 2011 that is not paid. The CRA will also apply the same interest to any penalties they have assessed.

    It doesn’t pay to ignore late income tax return filings. Eventually you will have to file and will be subject to the penalties and interest retroactively. Failing to file your income tax return is tax evasion and eventually the Canada Revenue Agency will catch up with you. Depending on how many years you haven’t filed they could prosecute you for tax evasion.

    Notional assessments are more common. A notional assessment occurs when the Canada Revenue Agency estimates how much income that they believe you earned based on tax slips filed by others or on returns you filed in previous years. When this happens, the Canada Revenue Agency essentially prepares a return on your behalf and then calculates how much tax you owe and assesses interest and penalties based on their income estimate.

    Most individuals who miss the income tax deadline do so because:

    • They don’t think they owe taxes
    • They are busy and it slips their mind
    • They know that they will owe and don’t have the money      to pay

    If you fall into the third basket there are financial solutions that can assist you. Simply ignoring your income tax problem will not make it go away. Over time, the size of the tax debt, interest, and penalties will continue to grow and the Canada Revenue Agency will become more aggressive in their efforts to force you to file and collect your tax balance. The faster you face it the faster you can get back on track. If you are behind filing for many years, it is never too late to become tax compliant and deal with your tax debt.

    For more information about the income tax deadline, interest and penalty calculation, or if you need help to deal with late income tax returns and income tax debt, please call DebtCare Canada 416-907-2582 or visit www.debtcare.ca

  • Canada Revenue Agency Collections Authority and How to Stop Them

    Thousands of Canadians owe money to the Canada Revenue Agency. Thousands more will fall behind filing their tax returns, hoping that by not filing their returns they can buy time to come up with a way to pay the tax that they know they will owe.

    What many people don’t realize is that whether you file or not, the Canada Revenue Agency can still take collection action against you if they believe you owe them money. Whether you file or not, the CRA could have tax slips on file, filed by others who have paid you and based on that can notionally assess you, make their own determination as far as how much income they believe that you earned and then take enforcement action accordingly. In fact, the Canada Revenue Agency can even proceed with enforcement action against you without notionally assessing you. The Canada Revenue Agency collections agents will often leverage enforcement actions to force you to file or comply with whatever information they are requesting from you.

    The size of an individual’s tax debt will in many cases be the result of his or her conduct. An individual who files his or her returns late, fails to declare income and has his or her returns re-assessed or audited will be subject to Canada Revenue Agency interest and penalties. This can, in many cases, double and even triple the size of the tax debt depending on the individual’s record with the Canada Revenue Agency. Each time a taxpayer is not compliant the Canada Revenue Agency records the non-compliance and the next time there is an infraction, the penalties are increased. Interest charged on Canada Revenue Agency debt is high and compounds daily.

    Once the Canada Revenue Agency collections department has decided to target you, they are able to deploy enforcement measures that can cause personal embarrassment and financial hardship. The most common enforcement measures deployed against individuals by Canada Revenue Agency collections agents are wage garnishments (50% of gross employment income and up to 100% of secondary income), property liens and using a document called a “Requirement to Pay” to freeze bank and investment accounts. Where businesses are concerned, the Canada Revenue Agency collections agents will commonly freeze bank accounts but also send notices to the businesses’ clients directing them to forward payment of all invoices to the Canada Revenue Agency. This is very similar to a wage garnishment, only instead of the Canada Revenue Agency collecting 50% of your income in this case, they can collect 100%. This measure forces many businesses out of business.

    If you owe money to the Canada Revenue Agency and can pay, great! But, what happens if you owe money to the Canada Revenue Agency and can’t pay?

    Consumers and businesses also have avenues that they can take to potentially reduce the amount of money that they owe to the Canada Revenue Agency. Programs like the Voluntary Disclosure Program enable Canadians to voluntarily declare income with the potential to avoid interest and penalties. Relief provisions enable clients who have a medical problem, financial hardship or have faced some other extraordinary circumstances to file an application to have some or all of the interest and penalties associated with a tax debt cancelled.

    The Canada Revenue Agency will not allow a consumer to directly propose a settlement on a tax debt. With that said, a consumer or business can stop Canada Revenue Agency collections action through Federal Government programs. When a consumer participates in a Federal Government program, the CRA in most cases will immediately cease collection action. Federal Government programs under the BIA are the only way that a consumer can reduce a principal tax debt and get a fresh start.

    Whether you owe a tax debt, think you will in the future or if you think that you cannot pay, you are best advised to seek professional help before the Canada Revenue Agency collections department begins to take action on your file.

    For more information about Canada Revenue Agency collections and how you can stop them please call DebtCare at 416-907-2582 or visit www.debtcare.ca.

  • Sued in the Small Claims Court? What Happens Next?

    There are over 90,000 new Small Claims Court Actions filed in Ontario each year and more than 150,000 Small Claims Court actions filed throughout Canada. Small Claims Court actions are usually filed by creditors like banks, finance companies and the collection agencies who represent them.

    Court Actions are also filed by individuals and businesses who are suing one another for a particular incident or contract dispute.

    In most Provinces including Ontario and British Columbia, a Small Claims Court action can be filed for up to $25,000.00. In most Provinces, the Small Claims Court process is as follows:

    1.       One party files a claim against another party.

    2.       The other party can then file a Defense.

    3.       If no Defense is filed, the party who initiated the claim can apply for default judgement.

    4.       If a Defense is filed, the parties will then attend a pre-trial conference and if they are unable to settle the matter, the case will proceed to trial. At trial, if the party who initiated the claim is successful he will be awarded judgement.

    Once a judgement has been awarded, the party who has the judgement can then take enforcement action using a variety of Small Claims Court remedies. They can file the judgement with the Sheriff’s office so that in the future if the individual tries to apply for financing (like a mortgage) and an execution search is performed, the individual will be required to pay off the judgement before he can obtain his financing. The party who holds the judgement can also apply for a wage garnishment. When this occurs a “Notice of Garnishment” will be sent to the debtor’s employer requiring the employer to remit 20% of the debtor’s net earnings to the Small Claims Court. The employer cannot refuse to honour the garnishment or else the debt could effectively be transferred to the employer and then he could owe the money.

    The party who holds the judgement can also file a lien on the debtor’s property, like a home or vehicle, and can also send notice to the bank to have their bank account frozen. They can call an assessment hearing requiring the debtor to attend the court and disclose their assets, earnings and more…

    If you owe money to your creditors and are in default, don’t let things go this far. It is better to work with a debt consultant who will work with your creditors to come up with a plan to deal with your debts. If you have already been sued in the Small Claims Court, have had a judgement issued against you and enforcement action is being taken, you have options. There are Federal Government programs that can be accessed through a debt consultant that will stop enforcement action issued by the Small Claims Court. Coming up with a plan to deal with debt owed to creditors will enable you to avoid the stress, embarrassment and financial hardship that can accompany a Small Claims Court action and provide you with a road map to financial recovery.

    For more information about what to do if you have been sued in the Small Claims Court please contact DebtCare Canada at 416-907-2582 or visit www.debtcare.ca.

  • Bill Collectors and the Collection Agencies Act – How to Stop Collection Calls

    If you default on payments to creditors the first people you are likely to hear from are bill collectors. Bill collectors are collection agents who work for collection agencies. Having a debt in collections can be stressful and may leave you wanting to figure out how to stop the collection calls from bill collectors.

    In Ontario, collection services agencies and bill collectors are regulated by the Ministry of Consumer and Business Services are have to follow laws outlined in the Collection Agencies Act. You can view the Collection Agencies Act on the E-Laws website.

    The Collection Agencies act was put in place to establish guidelines to put a stop to improper collection action on the part of Collection Agencies. In the past collection agencies would cross the line, harassing people who owed their client’s money, beyond ordinary collection calls to the debtor. This led the government to take action and establish limits for bill collectors.

    The first step a collection agency must take when a debt is assigned to them for collection is to send you a written notice through the mail (email doesn’t count). This notice must include:

    1. The name of the creditor (the person or business that says you owe them money)
    2. The amount the creditor says you owe
    3. The name of the collection agency and its authority to demand payment on behalf of the creditor.

    There are limits to how, when and how often bill collectors are allowed to contact you. Bill collectors are not allowed to contact you by telephone more than three times in a seven day period without your express permission. This includes speaking with you or leaving you a voicemail.

    The Collection Agencies Act also outlines that a collection agency or its bill collectors cannot:

    1. Call you on Sunday, except between the hours of 1 p.m. and 5 p.m.
    2. Call you on any other day of the week between the hours of 9 p.m. and 7 a.m.
    3. Call you on a statutory holiday
    4. Use threatening, profane, intimidating or coercive language, or
    5. Use undue, excessive or unreasonable pressure.

    A bill collector representing a collection agency can contact your employer once to obtain your employment information. Otherwise, they cannot contact your employer unless:

    1. Your employer has guaranteed the debt
    2. The call is in connection with a court order or notice of garnishment that has been issued by the creditor they are representing
    3. You have provided written authorization to contact your employer

    Under the Collection Agencies Act a bill collector representing a collection agency cannot contact your spouse, a member of your family or household, or a relative, neighbour or acquaintance or any other third party, except to obtain your address and telephone number, unless the person contacted cosigned or guaranteed the debt or you have provided permission for the person to be contacted.

    Finally, under the Collection Agencies Act a bill collector representing a collection agency cannot:

    1. Give false or misleading information to any person
    2. Recommend to a creditor that a legal action be commenced against you without first sending you notice.

    If you want to stop collection calls there are two ways to do it.

    Write to the collection agency and advise them that you only want to receive future communications from them in writing.

    If you cannot pay the debt owed to the creditor that the collection agency is representing you can also participate in a Federal Government Program which will not only provide immediate debt relief but will also stop collection calls.

    If a bill collector representing collection agency is harassing you or is exhibiting behaviour in contravention of the Collection Agencies Act you can make a complaint against through the Ministry of Consumer and Business Services.

    For more information about bill collectors, the Collection Agencies Act and how to stop collection calls please visit www.debtcare.ca or contact Michael Goldenberg at DebtCare Canada by calling 416-907-2582.

  • Wage Garnishments in Canada – How to Stop a Garnishment on Your Wages

    Thousands of Canadians have their wages garnished each year. In the past few years there have been more instances of individuals having their wages garnished because of the turbulent economy. Wage garnishments in Canada occur when one party believes that another party owes him or her money and pursues enforcement action.

    Wage garnishments in Canada are generally issued in one of three ways.

    The first most common reason a wage garnishment is issued is when a debt is owed to the government and the individual is unable to make a satisfactory, voluntary repayment arrangement. Some examples of this are: tax debt owed to The Canada Revenue Agency or The Minister of Finance or a debt owed to the Province and/or Federal Government for an unpaid student loan. If the government wants to place a garnishment on your wages, they don’t have to obtain a court order to do so. If you want to know how to stop a garnishment on your wages, the answer is pretty much black and white. You either have to make an acceptable voluntary repayment plan with the government so that they agree to lift the garnishment on your wages or participate in a Federal Government program to seek debt relief. Wage garnishments that are issued by the government can be applied at up to 100% of your wages.

    The second most common reason that a wage garnishment is issued is when one party sues another party in the Superior Court of Justice and is awarded judgement. Once awarded judgement he or she can apply to garnish the individual’s wages. A common occurrence is when an individual defaults on a debt to a creditor and then the creditor sues him or her in the Small Claims Court. When a wage garnishment is issued through the Small Claims Court in Ontario your wages can be garnished up to 20% of your net earnings. If you want to know how to stop a wage garnishment issued by the Superior Court you have three choices. Make a voluntary payment plan arrangement with the party who sued you where they agree to lift the wage garnishment, to make a motion to the Court offering a voluntary payment plan and asking that the wage garnishment be set aside, or by applying to a Federal Government program for debt relief.

    The third most common reason wage garnishments are issued is as a result of child support arrears. If you want to know how to stop a wage garnishment for child support arrears you have only one choice and that is to apply to the Court to have it removed. This can be very challenging to accomplish. A Federal Government program will not stop a wage garnishment for unpaid child support.

    The fastest most effective way to stop a wage garnishment is through a Federal Government program. The benefit achieved by leveraging a Federal Government program to stop a wage garnishment is that the garnishment will be stopped, interest will be frozen, in many cases you can have the principal amount of the debt that you owe reduced and make a voluntary monthly payment.

    Participating in a Federal Government program will require that you include all debt that you owe. If you have debt to other creditors like credit card providers, loan providers, unpaid cell phone bills etc., these debts will also be covered under the Federal Government program. This will mean that they too will have their interest frozen and in many cases the principal debt reduced. In the event that you had several debts you would make a single monthly payment under the Federal Government program.

    If you are having a financial problem and your wages are being garnished it could lead to increased financial hardship. You don’t have to suffer and there are options available.

    For more information about wage garnishments in Canada and how to stop a garnishment on your wages please contact Michael Goldenberg at DebtCare Canada by calling 416-907-2582 or visit www.debtcare.ca.

  • What is a Trustee?

    What is a trustee? A trustee is a person who holds property, authority, or a position of trust or responsibility for the benefit of another. In the case of an “estate trustee” the trustee could be a company or an individual. An estate trustee in the case of an individual who dies or is incapacitated,  represents the deceased or the incapacitated individual.

    There are other types of trustees though in specific matters that have different responsibilities and are appointed by the government to administer an estate according to legislation.

    What is a trustee in bankruptcy? In Canada, a trustee in bankruptcy is an individual or a corporation licensed by the Superintendent of Bankruptcy to hold in trust and, subsequently, to distribute bankrupt’s property among the creditors in accordance with the Bankruptcy and Insolvency Act (BIA). The bankrupt and all other persons holding the bankrupt’s property must transfer the property to trustee until he or she can determined how the estate shall be administered. “Property” includes income and assets. The trustee may also assist individual in preparing and submitting a consumer proposal to creditors.

    Where an “estate” trustee would act to carry out the intent of the deceased or in the best interest of the incapacitated individual, a “bankruptcy” trustee acts in the best interest of the bankrupts creditors and it is his or her obligation to recover as much money from the estate as possible for the benefit of the creditors.

    In Canada, consumers and businesses often find themselves confused, pondering the question “what is a trustee?” and many get the impression that the trustee in bankruptcy represents their best interests. This is because so many trustees aggressively advertise to people who have financial problems. They do this because they aren’t profitable unless they have individuals and businesses approaching them to file for bankruptcy or to file consumer proposals. These advertisements often promote debt solutions, debt settlements and debt help. When you visit the trustee he or she will often only offer one of two choices: a bankruptcy or a consumer proposal. Inevitably the question is who does the “debt solution” benefit in the end?

    In the case of a bankruptcy the trustee is paid a “tariff” a “fee” from the proceeds of the bankrupt estate. In the case of a consumer proposal the trustee receives remuneration based on a percentage of the amount of the consumer proposal that he or she negotiates.

    When you visit the trustee he or she will require that you provide complete disclosure of your income and assets. If the trustee determines that a consumer proposal is the only legal remedy to your debt, he or she will then determine the amount of the consumer proposal based on your ability to make monthly payments over 4-5 years. For example, if you owe $20,000 and the trustee determines that you can afford to repay your creditors at 100 cents on the dollar, on a monthly basis over 5 years then the amount of the consumer proposal will be $20,000, 100% of the debt owed. If the bankruptcy trustee determined that you can only afford to repay $13,000 over 5 years then your consumer proposal would be 65% of the debt owed. The challenge is that the smaller the consumer proposal, the less remuneration to the trustee, which provides an incentive to the trustee to arrange larger proposals. In addition and as we mentioned earlier the trustee is required by law to secure the greatest amount of repayment possible for the benefit of your creditors.

    It is for this reason that approaching a trustee directly to discuss your debt can be a risky proposition. In the past 5 years, this has spawned new industry: debt consulting. Debt consultants are familiar with the BIA and are able to evaluate your estate to help you determine which option is right for you and they can even negotiate on your behalf with bankruptcy trustees.

    This provides the insolvent person or debtor with a number of benefits.

    1.      Because the debt consultant is hired by the debtor, he or she represents the debtor`s best interests, not the creditors.

    2.      The debt consultant can interpret financial information and often negotiate a better deal than the consumer or business would have achieved had they visited the trustee directly.

    3.      The debt consultant can request evaluations of assets like homes and vehicles to ensure that the trustee does not over-estimate an asset resulting in you paying more in a consumer proposal or bankruptcy.

    4.      The debt consultant can work with you to come up with a financial plan to rebuild your credit and finances after a bankruptcy or a proposal.

    A bankruptcy or proposal offers many benefits and can provide a person who has a financial problem with immediate debt relief, including stopping collection action like a wage garnishment. Like anything else, researching a solution to a financial problem is truly “buyer beware” and if you are considering an avenue for debt relief like a bankruptcy or consumer proposal, we do not recommend that you do so unrepresented.

    For more information about a trustee in bankruptcy or if you are struggling with a financial problem please visit www.debtcare.ca or contact Michael Goldenberg at DebtCare Canada by calling 416 907-2582 for more information.