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Tag: tax debt

  • Taxpayer Relief in Canada – Do I Qualify

    If you have a tax problem in Canada, repercussions with the Canada Revenue Agency can be severe. If you filed your income taxes late or committed an infraction under the Canadian Income Tax Act, like failing to disclose income or writing off expenses that you weren’t entitled to, the Canada Revenue Agency has incredible power to punish you. By far the most common weapon that they use to punish you is your pocket book.

    When an income tax return is filed late and the CRA assesses what you owe, or a previously filed return is re-assessed and new monies are owed, the CRA will add interest and penalties to the amount of the tax debt that you owe. Often times, when an individual has a tax debt, the amount that they owe will double in size once the interest and penalties are calculated.

    Sometimes individuals have personal circumstances that led to their tax problem which is why taxpayer relief in Canada exists. Taxpayer relief in Canada is a formal program offered by the Canada Revenue Agency where the CRA can agree to cancel all or part of the interest and penalties. You can qualify under the Taxpayer relief program in Canada for one of the following reasons:

    A natural disaster like a fire or flood. For example, you misstated expenses resulting in an inaccurate return filing because your basement flooded and all of your receipts were destroyed

    1. Extreme financial hardship
    2. A documented personal issue like a medical problem or death in the family
    3. An error on the part of the CRA

    The only challenge with the Taxpayer relief program in Canada is that it is a long and complicated process and very few applications under this program are granted. To hire a professional to make an application under this program could cost you thousands. In addition, the CRA will not reduce the principal tax debt owed. The CRA does not offer any program that will reduce the principal tax debt that is owed.

    Before considering making an application under the Taxpayer relief program in Canada you may want to first look at the principal amount of the tax debt you owe and whether you can afford to pay it off at all. Often people who owe a large tax debt are not even in a position to pay it, regardless of whether or not they receive interest and penalty relief under the Taxpayer relief program in Canada.

    The longer you stretch out the time that you have a tax problem, the worse the tax problem will become. If the application under the Taxpayer relief program in Canada is denied, you will owe further interest that will have accumulated through the application period. The CRA will also continue to try to collect on the principal tax debt owed.

    There are other financial programs available that will freeze the interest on the tax debt that you owe and can even eliminate or reduce interest, penalties and the principal tax debt that you owe. These programs can also stop CRA collection action and provide you with immediate relief. These programs are not available through the Canada Revenue Agency, however you may access them through a financial consultant who works with people who have debt problems.

    For more information about the Taxpayer relief program in Canada or if you have a tax problem and need financial guidance or debt relief please visit www.debtcare.ca or call 416-907-2582.

  • 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.

  • Stopping a Garnishment of Wages in Canada

    Thousands of Canadians have their wages garnished each year for a wide range of reasons. A garnishment of wages in Canada can occur as a result of unpaid family responsibility, judgements that occurred as a result lawsuits (in Small Claims Court or Superior Court) or as a result of debt owed to the government. The most common government debt that results in a garnishment of wages in Canada is a tax debt that is owed to The Canada Revenue Agency.

    Stopping a garnishment of wages in Canada that is related to unpaid family responsibility is very difficult and can only be achieved in one of three ways: 1) through paying the child support arrears, 2) through going to court  or 3) the parent of the child who is owed support waives the support (in some cases).

    If you have a judgement against you in the Small Claims Court, your wages can be garnished up to 20% of your net earnings. If the Canada Revenue Agency imposes a wage garnishment against you, your wages can be garnished up to 50% of your gross earnings and up to 100% of any secondary earnings.

    A wage garnishment can cause financial devastation because the average Canadian will find it difficult to continue to pay for basic living expenses like shelter, transportation and food once his or her income has been reduced by 20%-50%.

    Where Canada Revenue Agency is concerned, it can be difficult to get the CRA to voluntarily lift a garnishment of wages once in place. The Canada Revenue Agency will often demand that the tax debt be paid in full or that a substantial lump sum payment be made before they will consider stopping a garnishment of wages. When a taxpayer owes thousands of dollars, the prospect of raising the money can prove impossible, leaving the taxpayer feeling powerless.

    Where a Small Claims Court judgement is concerned, stopping a garnishment of wages can be expensive because it will often involve returning to court and while you can represent yourself in Small Claims Court, many people will retain legal representation when attempting to get a wage garnishment reduced or lifted to increase their chances of success.

    There is another way to stop a wage garnishment issued by the Small Claims Court or The Canada Revenue agency which may be possible without going to court.

    Through a debt consultant you may be able to qualify under a Federal Government Program to deal with a debt that has arisen from a Small Claims Court Action or Canada Revenue Agency tax debt and that will involve stopping a garnishment of wages. When participating under one of these programs any collection action being taken against you by unsecured creditors will be “stayed” giving you an opportunity at a fresh start. The best course of action will depend on the amount of debt you have, your income and assets. Qualifying under one of these programs may end up being the easiest way for you to stop a garnishment of your wages.

    For more information about stopping a garnishment of wages in Canada please call DebtCare Canada at 416-907-2582 or visit www.debtcare.ca

  • 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.

  • 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

  • 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.