Tag: income tax debt

CRA’s Personal Income Tax Debt Collection – All You Need to Know
This year has been a challenging one for most Canadians. Restrictions continued to evolve and business and individuals, across different provinces, are being impacted.

The measures put into place to curb the spread of the COVID-19 pandemic have resulted in job losses and financial distress for many. Even though the government launched multiple programs to support Canadians, debt has continued to accumulate for many.

While collection action was temporarily halted during the early months of the pandemic, the CRA has now resumed some of its compliance, audit, and collections programs.

This blog helps answer the most frequently asked questions about personal income tax debt collection so that you can be more prepared when it comes to managing and paying off the tax debt.
1. Has the tax debt collection resumed?
Yes, as of September 2020, the CRA has resumed its debt collection activities.

CRA officials are reconnecting with taxpayers to discuss outstanding payments, gauge their financial standing, and work out payment arrangements, where possible.
1. Will I receive a call from the CRA?
Yes, you will be contacted over the phone or via mail. Collections officers or agents from the debt management call centre will be informing you about the balance you owe and evaluating your financial situation.
1. What can CRA do if I don’t pay my tax liability?
While no legal actions are being taken (at this point), it is good to know about what actions can CRA take if debts are not repaid in a timely manner.

Usually, the CRA sends you the notice of assessment or reassessment by mail and waits for 90 days before taking legal action.

Though, when CRA proceeds with collection action, it will take an aggressive approach. To get the payment, CRA can seize your bank account, garnish your wages and even register a lien on your property.
1. How should I deal with a CRA collections agent?
The CRA is known to take a tougher approach than any other agencies. Hence, it is usually more difficult to negotiate favourable terms of payment with the agency.

Collection officers get you to complete a financial disclosure form and once they have the information, they can use it to take actions such as garnishing your wages. Hence, we don’t ever recommend trying to negotiate with the CRA directly.

To avoid weakening your case and to negotiate properly, it is important to approach them represented.
1. How can an experienced debt consultant help?
When you get notified about your tax debt, reach out to a debt consultant. Debt consultants have years of experience in dealing with CRA and have long-standing partnerships with industry peers.

An experienced debt consultant can help negotiate a payment arrangement that works for you and the tax department collections agent. If you reach out to a debt consultant as soon as you are notified by the CRA, you can also avoid collection action.

No matter what your situation is, they enable you to analyze all of your options, discuss various strategies for repayment, and bring together the resources you need to resolve your debt issues.

At DebtCare, we work with you to create an action plan that not only reduces but ultimately eliminates your debt.

Contact us today to learn about one of the only programs that can resolve a CRA back tax problem and get a free consultation. Call us on 1-888-890-0888 or visit www.debtcare.ca.
April 14, 2021
CRA Collections are More Aggressive Than Ever – How to Stop CRA Enforcement Action
You might have heard the phrase “the bark is worse than the bite.” But when it comes to Canada Revenue Agency (CRA) collections, the bite is definitely scarier.

The CRA has many options available for collecting on unpaid tax debts – far more than other creditors, and often with less red tape involved.

CRA enforcement action might include:
- Wage garnishment.
- Requirement to pay from your clients, if you are self-employed.
- Frozen bank account.
- Liens against your assets, like your home.
- Criminal charges.
Unlike other creditors, the CRA is not required to give you any advance notice before freezing your bank account or garnishing your wages.

At best, this is inconvenient and embarrassing. At worst, it could result in losing a home, a car, or even in jail time.

In a recent CRA court case, a Surrey, B.C. man was sentenced to a 22-month conditional sentence, including eight months of house arrest. He was also fined $418,865.66 after pleading guilty to one count of tax evasion under the Income Tax Act. The CRA found that he had failed to report $1,284,254.81 of taxable income for the 2005, 2006, 2007, and 2008 tax years.

In another case, an Ottawa man was sentenced to a nine-month conditional sentence, including six months of house arrest, and a fine of $68,000, plus the full tax amount owing, after failing to report net business and rental income totaling $410,148 for the years 2009 to 2013.

Recent news releases shared that the CRA is becoming even more aggressive and cracking down on misuse of TFSAs, RRSPs, RRIFs, RESPs, and RDSPs. Federal Auditor General Michael Ferguson also found the CRA goes after average people aggressively for small amounts of tax owing, while offering amnesty and anonymity for those involved in sophisticated schemes.

In short, it’s better to avoid CRA collections at all costs if you can – but that is often difficult to do if you don’t have the money available to pay what is owing.

When you owe a tax debt you can’t pay, or have back taxes piling up, you need to take action. That is the only way to stop CRA enforcement.

This might look like:
- Securing a debt consolidation loan and using the money to pay the CRA, then paying back the loan over a fixed schedule.
- Accessing home equity and using the money to pay off the tax debt.
- Applying for CRA debt forgiveness programs. It’s worth noting that often these only deal with accumulated interest and penalties, but you still have to pay the principal tax debt.
- Filing for insolvency – either for a consumer proposal or for bankruptcy. This stops all CRA collection action.
You should never try to deal with the CRA on your own. While they may offer to negotiate, they could turn around and use the opportunity to gather your financial information to start enforcement instead. It’s better to work with a financial advisor who can be an intermediary.

At DebtCare Canada, we offer one of the only programs that can resolve a CRA back tax problem. When you work with us:
- Often your principal tax debt can be reduced.
- Interest and penalties immediately stop.
- Frozen bank accounts are unfrozen.
- Wage garnishments are lifted.
- Garnishments to customers are lifted.
- You are able to make a single monthly payment.
Don’t wait until CRA collections start. Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.
March 20, 2019
Dealing with Income Tax Debt – What Happens if You Owe?
The income tax filing deadline is April 30^th, and that means, if you owe a tax debt to the Canada Revenue Agency (CRA), you may be wondering what happens when you owe and how long you’ve got before the CRA will start asking for their money.

Firstly, failing to file is never a good idea, even if you know you will owe. Failing to file will result in penalties and interest, as well as possible enforcement action. These add up quickly. If you haven’t filed yet, try to do so soon.

Furthermore, not filing may be considered tax evasion. At the very least, you may be notionally assessed, meaning the government will estimate your income and then assess penalties and interest. The worst-case scenario, if you choose not to file, is that you could be prosecuted.

If you file and owe a tax debt, you’re in a better position because you won’t have those added penalties and you won’t face prosecution. However, the CRA won’t wait for years to pass before attempting to collect. We have seen taxpayers’ accounts frozen within the current tax year. For example, one taxpayer filed on time, owed $3000, and had their account frozen the following January.

A tax debt is a financial problem that should be addressed quickly – you can’t wait around hoping for the best. There really is no ‘best’ here.

The CRA will want to be paid in full. Agents are not interested in making negotiated settlements or agreeing to long-term payment plans. That just isn’t how they operate, no matter how dire your situation is. If you don’t have the money on hand to pay in full, here are some of your financial options:
- If you have good credit, you may want to consider obtaining a line of credit or loan from the bank. This option will rely on your ability to repay that debt, but on more reasonable terms. However, if you are already loaded with debt, it may not be the best solution because the interest is higher on unsecured credit.
- Use home equity to finance the tax debt. This is typically the lowest interest option but you will need a home and some equity to take this route.
- A consumer proposal. This is a no-interest option that will offer a low monthly payment and will sometimes even reduce your amount of total debt. There are some implications to credit to be considered, but if you’re already drowning in debt it could represent the best financial option overall.
The best way to deal with a tax debt you can’t pay in full is to speak with a financial consultant who understands all of your available options. Don’t go directly to the CRA as this will result in far fewer possible choices and things could become even more problematic as far as repayment.

At DebtCare, we can walk you through all of your options and get that tax debt off the table.

Call us today for a free consultation: 1 (888) 890-0888.
April 26, 2017
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 30^th, 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 30^th, 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
June 12, 2012
Dealing with Debt Part 4 – Income Tax Debt in Canada

Many, many Canadians struggle with income tax debt in Canada. Income tax debt in Canada can occur for many reasons, many of which were not intentional on the part of the taxpayer. Sometimes a taxpayer earns more than he or she expects, not realizing the tax implication. Other times taxpayers unwittingly declare expenses they are not entitled to. Once a tax return is filed later or re-assessed resulting in an amount owing, the Canada Revenue Agency will add penalties and interest retroactive on this tax debt causing it to double and even triple in size.

When a large income tax debt is owed to the Canada Revenue Agency it can be paralyzing. The Canada Revenue Agency will demand to be paid in full and has incredible authority and resources to collect the income tax debt from you. This can include freezing your bank account, placing a lien on your home or other assets, garnishing your wages and even criminal prosecution. Many people feel so overwhelmed when they have a tax debt that they simply ignore it because facing it is too stressful; but this is the worst thing to do because the Canada Revenue Agency will catch up eventually and the consequences will be catastrophic.

So what can a Canadian who has income tax debt in Canada do? The first thing is to realize that you have to deal with it and be pro-active instead of reactive. Waiting until the Canada Revenue Agency has taken collection action against you before dealing with the income tax debt will only result in major financial consequences that could disrupt your overall quality of life. When the Canada Revenue Agency does not have an enforcement measure in place you have more leverage because you are voluntarily dealing with the problem.

If you are behind in filing returns, get them filed. It is not illegal to owe money to the Canada Revenue Agency; failing to file is illegal and is tax evasion under the Income Tax Act. Yes, once you file your late returns you will owe penalties and interest but before you can truly deal with your income tax debt you must know how much you owe.

If you know that you have failed to declare income on a past tax return or written off expenses that you know you were not entitled to, consider filing a Voluntary Disclosure Application with the Canada Revenue Agency so that you can become tax compliant. Again, it is not illegal to owe money to the Canada Revenue Agency, but it is illegal to fail to disclose income and write off expenses that you were not entitled to.

If you do not have the liquidity to pay off your tax debt, get financial help. Work with a debt consultant to weigh your financial options. Income tax debt is like any other debt. There are Federal Government Programs in place to provide Canadians with a legal avenue to deal with their debt. These avenues in many cases do not involve bankruptcy and can stop Canada Revenue Agency collection action.

Do not do fancy footwork, transferring assets into the names of loved ones or attempt to hide your money. These efforts will be fruitless. Not only can you risk tangling your loved one up into your problem but you will also live a life fraught with worry wondering if tomorrow will be the day that the Canada Revenue Agency catches up with you.

Remember, you are not the first Canadian who has a tax problem and you will not be the last. There are solutions and all you have to do is take the first step towards them.

For more information about dealing with debt or to get help with income tax debt in Canada please visit www.debtcare.ca or call 416-907-2582.

April 24, 2012
CRA Income Tax Debt and how it Affects Small Business Owners

It’s tough to be a small business owner. Many small business owners really struggle the first few years that they are in business. When trying to build up a business there can be times where the business does well and times when it does not. Where sole proprietors are concerned their business income is almost one and the same as their personal income. While a sole proprietor can write off business expenses, the revenue that is left must be declared as personal income on her CRA income tax returns.

Small business owners, especially sole proprietors are the group that is by far the most at risk of running into trouble with the Canada Revenue Agency. Small business owners may not have the revenue at the beginning to afford bookkeeping services and often do not plan from the “get go” to set aside money to pay their Canadian income tax debt. It is sometimes hard to estimate what one might earn in a year and CRA income taxes are usually due on an annual basis. Tax time can be shocking to small business owners because not only is it more expensive for an accountant to prepare returns for an individual and a business but small business owners sometimes underestimate what they will actually have to pay.

One very common example of where small business owners can run into trouble with the Canada Revenue Agency is when they collect HST on behalf of the government. HST is trust monies that must be paid to the CRA and often small business owners will remit their HST on an annual basis. Time and time again we have seen small business owners who don’t set aside their HST money because they are certain that they will be able to pay it when the time comes to file their CRA income tax return. If the business is not doing well when tax time rolls around, coming up with the money to pay the HST may be a more difficult prospect than what they anticipated.

At this point usually one of two things will happen; the small business owner will miss his or her filing deadline fearing what the CRA will do when they process the HST return and then learn that the small business owner doesn’t have the money to pay or he or she might look for expenses to reduce the amount of HST owed. The latter is where huge problems can happen. Aggressive tax preparers may be able to make your income tax return result in an amount that you feel you can pay, however this can land you in big trouble if the CRA decides to look into your books.

The worst thing small business owners can do if they are worried about their CRA income tax debt is fail to file or manipulate their books. Both actions are illegal and can create a legal problem beyond the financial problem they would have had, had they filed their returns on-time and transparently.

No one goes into business wanting to have problems with the Canada Revenue Agency but it happens. Bad things happen to good people and usually tax problems don’t escalate because the person intentionally set out to create them.

The most important thing to do if you are a small business owner who has a tax problem is face it and work with a financial consultant to get your finances straight. Financial consultants are not tax preparers and are able to look at a business’s finances to come up with a strategy to help the business deal with its CRA income tax problem.

For more information about CRA income tax debt and how it effects small business owners or if you are a small business owner who is in trouble please visit www.debtcare.ca or call DebtCare Canada at 416-907-2582.

March 20, 2012
Dealing With Canadian Income Tax Debt

Tax time is here. For those who anticipate a large refund it is an exciting time. For those who know they will have to pay it is quite the opposite. Thinking about doing your taxes, knowing that you are about to face a large Canadian income tax debt, one that you know you will not be able to pay in full, can be dreadful.

One reason it is so scary is because once the Canada Revenue Agency assesses the amount of your Canadian income tax debt they will demand to be paid in full. The Canada Revenue Agency also has powerful authority to collect Canadian income tax debt that’s owed to them. Canada Revenue Agency collection practices range from demand letters, to calls, to enforcement action like wage garnishments and tax liens.

Fear of what the Canada Revenue Agency will do once they determine that you owe a Canadian income tax debt is the main reason that individuals procrastinate and avoid filing their tax returns. This is the worst thing you can do if you have a Canadian income tax debt because it is illegal. In addition, the Canada Revenue Agency can add interest and penalties that can cause your Canadian income tax debt to double in size.

So what can a Canadian taxpayer do when he knows that once he files his Canadian income tax return he will owe more than he can pay?

The solution to any problem will come with a plan. First, you do not have to go it alone. There are many organizations that help people deal with Canadian income tax debt. Debt and financial consultants are a great resource to get the help you need.

A plan will involve looking at your income, assets, and personal debts (debts that you have in addition to your Canadian income tax debt like loans and credit card balances etc.) and coming up with scenarios so that your representative can make a proposal to the Canada Revenue Agency enabling you to repay your Canadian income tax debt in a manner that you can live with.

So what happens if you review your financial situation and there is no additional ability to pay anything to the Canada Revenue Agency? Well you can’t draw blood from a stone but you also can’t ignore the problem resulting in the Canada Revenue Agency taking action against you that can severely disrupt your life.

If it happens that there is no way for you to repay your tax debt, you can find relief through Federal Government programs that can eliminate interest, penalties and even principal tax debt. Participating in one of these programs can enable you to breathe a sigh of relief because it may be the route that enables you to deal with your Canadian income tax debt upon terms you can live with.

You don’t have to be afraid of your Canadian income tax debt because there are resources to help you face your tax debt before everything spirals out of control.

For more information about dealing with Canadian income tax debt contact DebtCare Canada at 416-907-2582 or visit www.debtcare.ca

March 13, 2012