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Tag: tax debt

  • 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.

     

  • 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.

     

  • 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.

     

     

  • Dangerous Canada Revenue Agency Requests and What to Do if You Get One

    debt1Tax, tax, tax. There is nothing fun about tax – especially when you owe. If you owe the Canada Revenue Agency money, you are sitting on a ticking time bomb. They want that money and they will get it.

    The Canada Revenue Agency is not your friend. Agents can be sneaky when it comes to finding and collecting tax dollars. Just remember: the more they are willing to negotiate with you, the less information they have – hence the willingness to ‘cooperate’. They will only negotiate to get information from you. And once they retrieve that information, that ‘cooperation’ can turn ugly, really quickly, leading to a payment plan that you can’t conceivably manage.

    Here are some of the Canada Revenue Agency requests that may seem harmless at first:

    • Asking where you work
    • Asking where you bank
    • Sending you a financial disclosure statement
    • Asking you to submit info on your income and expenses in exchange for a payment plan

    Sure, these may seem like basic requests, but this is how the information is used:

    • Knowing where you live = search to see if you own your home, can be used to leverage a lien
    • Knowing where you work = can be used to leverage a wage garnishment
    • Knowing where you bank = can be used to leverage a frozen bank account
    • Knowing who your clients are = can be used to set-off your receivables

    If you have received any Canada Revenue Agency requests for information, you could be in serious trouble and should not try to deal with them directly, on your own. Any questions you answer, no matter how harmless they may seem, can be used against you. So, what can you do?

    If you have a tax debt that you can pay, stop ignoring it and pay it. Once you’ve paid the balance on the debt, the Canada Revenue Agency will stop collection action because you no longer owe them money. This is the best solution to the problem.

    However, if you have a tax debt you can’t pay, you have a financial problem, so get counsel before taking any action. Speaking to a financial specialist, one with the knowledge and experience helping individuals deal with Canada Revenue Agency requests and collection action, will help you determine the best course of action to deal with debt.

    In the end, our best advice is to refrain from offering the CRA any recourse for action using information willingly handed over by you, the taxpayer.

    Have a tax debt and receiving CRA requests for info and don’t know what to do? Call DebtCare. We can help you deal with the CRA and get rid of that tax debt. 1-888-890-0888.

     

  • Fighting a Wage Garnishment that Wasn’t Issued by the Court

    wage garnishmentThe only type of wage garnishment that is not issued by the court is one that relates to government debt, like debt to CRA, or other less common debts, like debts related to EI overpayments.

    Where CRA garnishments are concerned, if you owe money, CRA can issue a wage garnishment without notice to you and without a court order. The wage garnishment could be up to 50% of your earnings. Once your employer is served with a wage garnishment from CRA they have to honour it or they too could get stuck with responsibility for your tax debt.

    Wage garnishments are very embarrassing and often CRA finds out where you work and where to serve them because you gave them this information. Oh yes….remember that nice CRA agent who phoned and said that if you filled out some financial forms including where you work that you could make a payment plan for 3 months. Only the payment plan you agreed to was more than you could afford and Bam! Wage garnishment.

    Once a wage garnishment is put in place by CRA you have 4 options:

    1. Pay the tax debt – beg, borrow, steal to get the money (we were kidding on the steal option – the other 2 are viable). Perhaps you can refinance your mortgage or borrow the money from your family. This still leaves a debt outstanding but at least your creditor is not the government.

    2. Ask CRA to reduce or remove the wage garnishment – we wish you good luck with this option. Likely this option will lead to you divulging more information to CRA for them to use against you. In all seriousness, CRA agents are very skilled at what they do – if you plan to try to negotiate directly with CRA, it is best to do so through a seasoned financial professional who is experienced at dealing with them!

    3. Go to tax court – if you can’t pay the debt in full it is highly unlikely, especially with your shiny new wage garnishment, that you can afford to go out and get a lawyer. Tax court is not like what you may remember from Peoples’ Court – it is not a good idea to go to tax court without a lawyer. You will be going up against a trained CRA lawyer who works in the tax court daily and knows the law intimately.

    4. Consumer proposal or bankruptcy – either option would immediately stop a CRA wage garnishment. Whether or not this is an option will depend on other financial circumstances.

    The options are clear. However, where the less common government debts that arose as a result of fraud are concerned, EI overpayments being a good example, option number 4 will not work because debts that arise from fraud are not protected in a consumer proposal or bankruptcy.

    If you owe CRA a debt, don’t ignore it. Seek out professional financial assistance and get that debt dealt with. DebtCare can help. Call us today at 1-888-890-0888.

  • So You Have Filed Your Income Taxes and You Owe – Now What?

    wage garnishmentSo you’ve made it through income tax time but you know you are going to owe – now what?

    Your first step is going to be to take a good hard look at your budget. CRA will want to be paid in full so that should be your first goal. If this goal is unattainable, that means that some negotiation with CRA is going to be involved. This can be very tricky because when speaking with them, the first thing they will try to do is get you to share personal information with them that they can then use against you later when trying to collect the tax debt.

    Here are some examples:

    • Where do you work? = wage garnishment
    • Where do you bank? = frozen bank account
    • Where do you live? = property lien

    In fact, the most dangerous CRA agents are actually the nice ones! Through one casual conversation, during which you are just trying to be friendly and compliant, these agents can extract enough information from you to do some serious damage. Then, after you’ve made your disclosure, they will turn around and demand a monthly payment in excess of what you can afford to pay monthly or they suggest that you start liquidating assets to pay them.

    This is why negotiating with CRA directly is never recommended.

    Aside from trying to charm information out of you on the phone, agents will often appear to entertain the idea of a payment plan IF you complete their financial disclosure statement. This statement basically discloses every asset, investment and income/income source you have. This is, by far, one of the most dangerous CRA forms.

    If you have a tax debt that you know you can’t pay in full, your best bet is to obtain some professional guidance. Perhaps there is some way you can pay the debt and therefore negotiate, but perhaps there is not and you will require additional protection against the powerful CRA.

    Most action that CRA can take can be taken without warning you, nor do they need a court order. From the point when your return is assessed to the point when your account is assigned to a collection officer is only about 3-6 months, so time is of the essence. Waiting until you are on CRA’s radar to formulate a plan is not recommended.

    Get a jump start on finding a solution for your tax debt and see the light at the end of the tunnel sooner rather than later. DebtCare can help you negotiate with, and protect yourself from, CRA. Call us today at 1-888-890-0888.

  • Ahead of the Game: Tax Debt Relief Before the Tax Deadline

    Tax Debt ReliefThe deadline for filing your 2014 tax return is fast approaching, and that means getting all of your ducks in a row to be able to meet those tax obligations that often arise once your assessment is returned to you. For those who know they won’t owe, this time of year represents just an added bit of necessary hassle – but for those individuals who either already owe a tax debt, or know that one is looming, this time represents significantly more stress.

    If you are in the latter group, avoiding the issue is never a good idea. If you owe the CRA money, they will try their very best to get it – as soon as possible. This might mean leveraging various enforcement actions against you, including wage garnishments, frozen bank accounts or even property liens. Pretending the problem doesn’t exist isn’t going to make it go away.

    Here are some options to consider for tax debt relief that may be beneficial:

    Negotiate with CRA

    • As mentioned, when the CRA is owed money, they will try their best to get it. Calling to negotiate with an agent might work as far as getting a payment plan in place – but there are number of things to be careful with when it comes to this option.
      • The CRA isn’t interested in your financial situation, and if you don’t have the extra income to pay the debt they are still going to attempt to get the maximum amount possible.
      • Miss one payment and they will leverage those above mentioned enforcement actions almost immediately.
      • Once you’ve called the CRA and tried to negotiate a payment plan, the CRA will be aware of all of your personal information – including your banking information – making self-protection almost impossible.
    • This option is usually one that is best accomplished by having an expert act on your behalf and not by acting on your own.

    Consumer Proposal or Bankruptcy

    • If your tax debt is substantial, both of these options can offer a significant amount of tax debt relief. Either one might offer the benefit of a reduced debt and/or interest, and can ensure that your monthly payments are set at an amount that you can handle.
    • Neither of these options can be achieved on your own – as legal processes, both need to be conducted by a trustee in bankruptcy, someone with the knowledge and experience conducting these forms of debt relief. Just make sure to get the advice or assistance of a debt consultant first to represent you through the entire process.

    Debt Consolidation

    • Need to free up some money to be able to meet those tax debts head on? A debt consolidation may be the answer. This is also something to be considered when consulting a debt specialist.

    For many Canadians, this time of year is one that leads many to think about tax debt relief and how to obtain it. DebtCare Canada can help. Call us today at 1-888-890-0888.

  • Tax Time is Upon Us: Are You Afraid You’ll End Up Owing Money to CRA?

    Owing Money to CRAIt is that time of year again; soon the tax man will be knocking at the door asking for your 2014 assessment. If you know that your taxes are all in order and are expecting a refund, that is great! However, if you are in the opposite camp, and are afraid that once those taxes are filed you are going to end up owing money to CRA, you might be a bit worried.

    Tax debt is really scary, and for good reason. Unlike other creditors, CRA does not need a court order to freeze your bank account or send a wage garnishment letter to your employer. Not only do these things impact your personal life, they can also begin to impact your professional life. This is not a good situation to be in!

    So, what can you do when you know that, upon receiving your assessment, there will be a balance owing at the bottom of the document?

    1. Think filing late in order to give yourself time to get your finances in order will do the trick? Think again. CRA applies a late filing penalty to every month you miss (5% of your 2014 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months). This doubles if you also filed late last year or in one of the preceding years.
    2. If you have the means to pay off the debt in its entirety, do so as soon as possible. This might mean using some available credit or dipping into your savings, but since the debt is not interest free and CRA is unforgiving when payments are missed, this is by far your best option.
    3. If you don’t have the ability to pay off the debt, consider a consumer proposal. Filed by a registered trustee in bankruptcy, a consumer proposal, once accepted, can stop interest, consolidate all debts (not just the tax debt) into one monthly payment, and in some cases can even bring your total debt down. But there are pitfalls, and to avoid them this should not be entered into without meeting with a debt consultant to give you independent advice prior to filing your proposal.

    Ignoring a tax debt in the hopes that it will go away is not a good idea. All this approach will garner is a higher amount owing once penalties and interest have been added. Don’t ignore the debt – deal with it.

    For more about what to do when you end up owing money to CRA, or any other debts, please contact DebtCare Canada today by calling 1-888-890-0888.

  • Tax Return Going to Result in Tax Debt? What Can You Do If You Can’t Pay

    Tax DebtThe tax deadline is upon us, and for many this means a necessary hassle we must face annually – but once dealt with, is quickly relegated to the back of our minds until this time next year. For others however, those with a tax debt looming over their heads, tax time brings with it some serious stressors.

    As we hope you are aware, the tax deadline this year for personal income tax returns is April 30th. If you have everything in before this date, that’s great, especially if you don’t owe anything. However, if you have yet to file, and think you might owe, it might be prudent to consider the late filing penalties and how they can impact your tax debt – it might just be enough to motivate you to get your filing done.

    2013 late filing penalties:

    • If you owe for 2013, and do not file by April 30th, you will be charged a late filing penalty of 5% of your 2013 balance, plus 1% of the balance owing for each full month your return is late (to a maximum of 12 months).
    • If you were charged a late filing penalty for 2010, 2011, or 2012, your late filing penalty can increase to 10% of your 2013 balance, plus 2% of the balance for each full month (to a maximum of 20 months).

    These penalties are steep – and no one wants to get saddled with a major tax debt, plus interest – but what if you can’t pay? If you are thinking about just ignoring that debt, hoping that by not filing the CRA won’t catch on and you’ll be spared the financial strain – think again. The consequences of not filing may mean a notional assessment, where the CRA will estimate your annual income and charge you what they feel you owe based on their findings. Continued failure to pay a tax debt can result in enforcement action, including wage garnishments, frozen bank accounts, even property liens.

    So what can you do? If you have filed and owe, or if you have yet to file because you are afraid that you will owe, know that you have options. Don’t ignore that tax debt in the hope that it will go away. Speak to a debt solutions specialist to find out about all of the options available to you to get rid of that tax debt once and for all.

    For more information about dealing with a tax debt please contact DebtCare Canada today by calling 1-888-890-0888.