Tuesday, 27 December 2011

Canada Revenue Agency Collections Policy has the Potential to Ruin Your Life

The Canada Revenue Agency has a very aggressive collection policy. Their mandate is to collect past due tax debts and they have what appears to be limitless authority to do so. This article will outline the top 4 tactics that the Canada Revenue Agency will deploy to collect from you when you have an outstanding tax debt.

1.       Wage Garnishments. The Canada Revenue Agency routinely places wage garnishments on taxpayers who have an outstanding income tax debt. A wage garnishment served upon an employer could result in a garnishment of your wages of up to 50%. Secondary income like pension income, insurance income, etc. can be garnished up to 100%. Once the Canada Revenue Agency serves your employer with instructions to garnish your wages, they must and will comply. Once a wage garnishment is attached it can be very difficult to remove.

2.       Property Liens. The Canada Revenue Agency will place a lien on your home, vehicle or equipment (in the case of a business), if they learn that you have an asset. Even if you have no equity in the asset and no ability to refinance it, they will still place a lien on it. If you cannot raise the money to pay your tax debt in full, they can force you to sell the asset and will take any proceeds (if any) to cover the tax debt.

3.       Requirements to Pay on Bank Accounts. If the Canada Revenue Agency sends your bank a requirement to pay, your bank account will be frozen. The bank will hold the money in your bank account for 30 days and then send it to the Canada Revenue Agency. Outside of the fact that you will lose all the money in your bank account, it will also alert your bank to the fact that you have a tax problem. In many cases this will permanently damage your relationship with your bank.

4.       Set-Off’s on Invoices. If you are a small business owner, the Canada Revenue Agency can send a set-off notice to your customers. This notice will direct your customers to forward the payment of your invoices to the Canada Revenue Agency. Not only can this put you out of business because you will have no business income coming in; in addition, your clients may be apprehensive about continuing to work with you under these circumstances.

Depending on the severity of your tax problem, the Canada Revenue Agency could take more than one of these collection actions, concurrently. You do not have to let things go this far; there are services available to help individuals and businesses that have an income tax debt. If your wages are already being garnished or your bank account has already been frozen, there are Federal Government programs available to help. Once you participate in one of these programs, the Canada Revenue Agency will immediately, and must by law, remove a wage garnishment and/or unfreeze your bank account.

For more information about the Canada Revenue Agencies collections policy or to see if you qualify for relief contact Michael Goldenberg at DebtCare Canada by calling 888-890-0888 or visit

Tuesday, 13 December 2011

Canada Revenue Agency Income Tax Debt and You

Canada Revenue Agency income tax debt can be crippling when your payments fall behind. Interest and penalties accrue at an alarming rate, and what starts off as a small debt can grow into something a lot more difficult to pay.

Income tax debt is much more serious than other types of debt because the Canada Revenue Agency has many more resources to collect the money from you, as opposed to regular creditors such as banks and finance companies. Banks and finance companies must take you to court and obtain a judgment against you before they can take any legal enforcement action. The Canada Revenue Agency does not.

When income tax debt is owed, it is a demand debt and the Canada Revenue Agency will demand to be paid in full. Very seldom will the Canada Revenue Agency consider making a voluntary payment plan arrangement with a consumer or a small business. If they do, they will request full financial disclosure, including your banking and employment information. This is done to ensure that if you can’t honour the payments, they know where to go to attach a lien or garnishment.

The financial disclosure is also used to determine your cash flow. They will not consider monthly payments that you have to make to other creditors, such as credit card companies and loan providers. They will deduct your basic living expenses from your income and they will want to be paid what’s left. For most individuals, this is unrealistic and results in total destruction to the consumer’s credit rating.

Outside of the financial implications of a tax debt, other problems can arise. The stress associated with a tax debt can cause medical problems like depression and anxiety. In extreme cases, individuals have even contemplated suicide when the stress of having an income tax debt to the Canada Revenue Agency proved to be too much to handle.

Similar to dealing with other debt problems, an outstanding income tax debt can also cause a strain on relationships. When financial problems emerge they can cause otherwise happy couples to have major problems. Wage garnishments sent to employers by the Canada Revenue Agency can cause unbelievable embarrassment and are very difficult to stop once they are in place.

If you have an income tax debt, the most important thing to do is attack it; don’t ignore it. It will not go away by itself. Ignoring it will eventually result in the Canada Revenue Agency taking collection and enforcement action against you.

There are resources available to individuals and businesses that are struggling with a tax debt. These resources generally do not involve bankruptcy. There are Federal Government programs available to help individuals and businesses that have tax debt. Do not attempt to negotiate with the Canada Revenue Agency yourself, as this could have dangerous consequences. Instead, work with agencies that have access to Federal Government programs and experience negotiating with the Canada Revenue Agency
. For more information about Canada Revenue Agency income tax debt and to see if you qualify for relief contact Michael Goldenberg at DebtCare Canada by calling 888-890-0888 or visit www.debtcare.ca 

Wednesday, 7 December 2011

Small Business HST and Past Due Tax Returns – What You Need to Know

HST has intensified the tax obligation of small business owners. Prior to the HST, many small business owners only had to collect and remit 5% GST. With the amount that must be collected and remitted increased to 13%, the stakes for those who fall behind in filing their HST returns is much higher.

The Canada Revenue Agency is much more aggressive when collecting past due HST as opposed to GST because the tax revenue for the government is now more than double. In conjunction with that, they are also more diligent in their reviews of HST tax returns and claim expenses.

Once tax returns (including GST returns) are more than 4 years past due, the Canada Revenue Agency will not permit the taxpayer to claim input tax credits. The
interest and penalties on past due HST and GST returns are massive.

According to the Canada Revenue Agency website
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/bspsbch/rtrns/pnlts-eng.html, when GST/HST returns are filed late the following formula will apply to tabulate the penalty that will be applied to the tax debt:

a)      1% of the amount owing; plus

b)      the result of the following calculation:

A x B where A is 25% of the amount you calculated in (a) and B is the number of months the return is overdue (to a maximum of 12 months).

In addition, the Canada Revenue Agency will also charge interest on an overdue amount equal to the basic rate plus 4%. Late filing of a GST return is not the only way you can incur GST penalties. You can also be fined for non-compliance. If you receive a demand to file a return and fail to do so, a penalty of $250 will be charged.

This can cause a GST/HST tax debt to double or even triple in size. Facing this type of tax problem, especially where multiple past due returns are involved, can be paralyzing. It simply can’t be ignored because it will not go away on its own.

Fortunately, there are programs that are not offered through the Canada Revenue Agency but are Federal Government programs that will provide a small business owner tax relief as well as relief of interest and penalties. These programs do not involve bankruptcy, and not only will they eliminate interest and penalties but will also reduce the size of the overall tax debt.

It is best not to wait until the Canada Revenue Agency is pursuing enforcement and collection action. Act now and take the steps necessary to deal with a tax debt. If collection action has already begun, these Federal Government programs will stop all collection action including garnishments and frozen bank accounts. For more information about small business
HST and past due tax returns please contact DebtCare at 888-890-0888 or visit www.debtcare.ca

Thursday, 1 December 2011

Tax Relief and the Canada Revenue Agency Tax Payer Relief Program - Who Qualifies?

When an individual or business falls behind filing tax returns, it is imperative that they become tax compliant.  Filing tax returns and being up to date is very important. It is important because as long as tax returns remain in arrears the taxpayer will not only face massive interest and penalties, but could also face prosecution.

Usually financial problems are the primary reason cited for people falling behind in filing their tax returns. They don’t file because they know that once their tax returns are filed they will face the daunting task of paying their tax debt, in its entirety, to the Canada Revenue Agency.

The Canada Revenue Agency Tax Payer Relief program offers individuals and businesses the ability to request relief of interest and/or penalties. This is not tax relief; the Canada Revenue Agency will not reduce the actual tax debt and under this Tax Payer Relief Program, only interest and/or penalties can be forgiven.

Applicants who want to apply for taxpayer relief under the Canada Revenue Agency Tax Payer Relief Program will have to satisfy the Canada Revenue Agency (C.R.A.) that any one of four circumstances prevented them from filing their tax returns or from paying their tax debt. These circumstances include:

1.       Significant financial hardship.
2.       A serious medical problem.
3.       A natural disaster.
4.       An error on the part of the Canada Revenue Agency.

Very few applications for taxpayer relief are approved. Before one considers whether the cost of hiring a representative to make an application for interest and penalty relief under the Canada Revenue Agency Tax Payer Relief Program is worth his while, he should first consider if he even has the ability to pay his principal tax debt in full.

Once a tax debt is owed to the Canada Revenue Agency, they will demand to be paid in full. They will also proceed to collect their money. Collection action could include wage garnishments, property liens, freezing bank accounts and more. Business owners could face having their customers notified of their tax problem and have a set off placed on their receivables.

Directly attempting to negotiate with the Canada Revenue Agency is similar to playing Russian roulette. In most cases they will not make a voluntary payment plan with you unless you offer complete financial disclosure. Once they learn where you bank and what assets you have, you are in a very vulnerable position. Most voluntary payment plans that individuals self-negotiate are short term, so once the term is up and the taxpayer tries to negotiate another payment plan, they will refuse. This is simply due to the fact that they now have full financial disclosure, at which point they will proceed with further enforcement action ensuring that they collect all of their money.

The good news is that Federal Government programs do exist. Programs that do offer taxpayer tax relief will not only eliminate interest and penalties but will also reduce the size of a taxpayer’s tax debt significantly. To see if you qualify for tax relief, you must deal with an agency that can provide you with access to these programs. For more information about tax relief and the C.R.A. Tax Payer Relief Program please contact
DebtCare Canada at 888-890-0888 or visit www.debtcare.ca