Tuesday 22 May 2012

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.

Tuesday 15 May 2012

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.

Tuesday 8 May 2012

CRA "Requirement to Pay Issued" - What is it and what can you do?


If you owe money to the Canada Revenue Agency they have many resources at their disposal to collect the money from you. One very common resource that they deploy is called a “Requirement to Pay.”

A CRA “Requirement to Pay” is a document that the Canada Revenue Agency will send to a third party, like a bank requiring them to remit to the Canada Revenue Agency any funds that you have held there. The CRA “Requirement to Pay” will indicate the amount of debt that you owe and will indicate the CRA agent who is assigned to your file. When a CRA “Requirement to Pay” is issued to a bank for example, the bank will freeze your bank account. The bank then holds your frozen funds for 30 days and then remits the money to the Canada Revenue Agency.

Before a CRA “Requirement to Pay” is issued, the Canada Revenue Agency will usually send you a letter demanding payment first. In the demand letter the Canada Revenue Agency will demand that you pay the debt in full or make arrangements within a prescribed period of time.

Many times consumers will receive a demand letter from the Canada Revenue Agency and contact the Canada Revenue Agency to make payment arrangements. Sometimes the Canada Revenue Agency will accept a short term payment plan (3 months – 6 months) with the condition that the consumers make complete financial disclosure to them. This includes where they bank, where they work and with the understanding that after 3-6 monthly payments they will once again review the taxpayer’s financial ability to pay. This financial disclosure can result in a CRA “Requirement to Pay” being issued at the end of the 3 or 6 months because the Canada Revenue Agency will now know where the taxpayer has his or her bank account.

If you have a debt with the Canada Revenue Agency it is important to take action. Owing money to the Canada Revenue Agency can be intimidating, especially when you know that you have no ability to pay off the debt. Waiting for collection action to occur can present many challenges and where a CRA “Requirement to Pay” is issued to a bank, it can harm a taxpayer’s relationship with his or her bank and even result in an account closure. If it is an account where payroll is deposited, it presents an incredible inconvenience and financial hardship because once the bank account is frozen any funds deposited into it will be held and remitted to the Canada Revenue Agency. This is worse than a wage garnishment because in this case the Canada Revenue Agency can not only seize your savings but can also capture 100% of any payroll payment deposited to the account.

Your best plan is to acknowledge that you have a financial problem and work with a debt counsellor who has the expertise, tools and resources to help you avoid a CRA “Requirement to Pay” or work to get your funds returned to you if a CRA “Requirement to Pay” has been filed.

The worst thing that you can do is attempt to negotiate with the Canada Revenue Agency yourself, making financial disclosure to receive a short term payment plan. The CRA has incredible authority and resources and your best chance at being successful is by working with a professional who knows how to deal with them.

For more information about CRA Requirements to pay or if you have had a CRA Requirement to Pay issued against you please call DebtCare Canada at 416-907-2582 or visit www.debtcare.ca.

Tuesday 1 May 2012

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