Monday, 25 June 2012

Canada Revenue Agency Forms and Requests: - Beware

If you have a tax debt that you cannot pay in full, you should be very careful dealing directly with the Canada Revenue Agency (CRA). In fact, many agencies, including law firms, advise people who have large tax debts not to deal with the Canada Revenue Agency directly. 

Why? Because CRA agents are hired by the government to collect the tax debt from you. Their primary objective is to close your file and that will only happen in one of two ways: pay the tax debt you owe, or file a consumer proposal or bankruptcy. 

The Canada Revenue Agency has many tools in its arsenal to collect your tax debt. These tools include garnishing your wages, freezing your bank account and placing a lien on your property. They cannot however take these enforcement actions against you unless they have done their homework. For example, they can't freeze your bank account unless they know where you bank, they can’t place a lien on your home unless they know you own a home, and they can't garnish your wages unless they know where you work.  

Of course, the Canada Revenue Agency does have its own ways to find this information, but sometimes you can be your own worst enemy in this regard. Many people want to make payment plans with the Canada Revenue Agency to pay their tax debt and will directly contact the Canada Revenue Agency to attempt to do so. The CRA always wants to be paid in full. Generally they won't accept a long term payment plan unless it involves paying off the tax debt within 24 month, which many people are unable to do when they have a large tax debt. This is where Canada Revenue Agency forms and requests come in. 

Say for example you owed $40,000. Over 24 months, your monthly payment would be $1,666 per/month but you can only afford to pay $500 per/month. When calling the Canada Revenue Agency they may indicate that they are willing to accept a temporary 3-6 month payment plan based on $500 per/month if you fill out a Canada Revenue Agency form providing financial disclosure. This form will ask you about your income, income sources, expenses, assets, liabilities, where you bank and more. Once they receive your financial disclosure, they may disallow payments for expenses that do not include shelter, food and transportation and then demand a much larger monthly payment. They may accept the lesser monthly payment for 3-6 months but the danger is that if they demand more, or when the short term payment plan you negotiated expires, the CRA will have all of your personal financial information that you provided in the Canada Revenue Agency form and can proceed to take enforcement action against you. Don’t get caught in this trap.

If you owe money to the Canada Revenue Agency there are solutions available to you. If the CRA has presented you with one of these Canada Revenue Agency forms for financial disclosure, seek professional help immediately. A seasoned financial consultant with experience dealing with the Canada Revenue Agency can help you negotiate a repayment arrangement that you can live with and help you protect your personal information.

For more information about Canada Revenue Agency forms and requests to beware of or if you need help with a tax problem, please contact DebtCare Canada at 416-907-2582 or visit

Tuesday, 19 June 2012

How to Make a Credit Card Debt Settlement

When credit card debt begins to build up it can become very difficult to pay off. Credit cards bear monthly compound interest so if you get into a routine of making minimum monthly payments, the interest can sometimes be as much as the payment that you make. The end result is that you make a minimum payment and then once the interest is applied to the balance, you end up owing the same amount as you did before the payment. 

If you start missing payments the balance increases and late fees may also be added to the balance, making the debt grow even larger. This can start a vicious cycle that can result in the credit card debt going to collections and destruction of your credit.

There is no magic bullet for dealing with credit card debt. Your options are really to come up with the money to pay it off, borrow the money to pay it off, make a credit card debt settlement, or file a consumer proposal or bankruptcy.

Before choosing an option to deal with your credit card debt you must look at many factors as you want to make sure that you select the option that will help you to achieve your long term financial goals. Why are you having a problem paying the credit card debt in the first place? Often times people stop being able to manage their credit card debt because of a lack of cash flow. If you are at the point where you cannot manage your credit card debt payments because of a lack of income then you may want to look at ways to reduce the credit card debt before you start trying to come up with a way to pay it off.

The state of your credit report is also an important consideration when trying to come up with a plan to pay off credit card debt. If you fully defaulted on the debt (have not made a payment in 6 months) or have made habitual late payments, your credit report is likely to be in bad shape. Once your credit report is compromised, (whether you pay off the credit card debt in full or make a credit card debt settlement) there will be no difference in how long it takes to rebuild your credit. There will however be a major difference in how much it costs you to pay off the credit card debt.

A credit card debt settlement can be achieved through a financial consultant who can make a credit card debt settlement directly with your creditor or through obtaining the assistance of a trustee to make the credit card debt settlement through a consumer proposal. The credit card debt settlement option will depend on many factors including your income, employment, financial goals, the amount of debt you have, the liquid cash available, and the number of creditors you have. If you want to make a credit card debt settlement, work with a financial consultant. He or she will be able to interpret your entire financial situation and come up with the best plan for you.

For more information about how to make a credit card debt settlement please contact Michael Goldenberg by calling DebtCare Canada at 416-907-2582 or visit

Tuesday, 12 June 2012

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

Tuesday, 5 June 2012

Wage Garnishment? We Explain: What is a Wage Garnishment?

If you have experienced having a garnishment placed on your wages you know that it is no fun at all. If you are being threatened with a wage garnishment it is important to act quickly. A wage garnishment can cause financial hardship and considerable embarrassment.  

What is a wage garnishment? A wage garnishment occurs when you default on your debt and your creditor obtains a judgement against you in court. A wage garnishment in Small Claims Court can involve seizing up to 20% of your earnings. When a tax debt is owed to the Canada Revenue Agency they do not need a court order to garnish (seize) your wages because they have the authority to do so under the Canadian Income Tax Act. The Canada Revenue Agency can garnish up to 50% of your primary employment earnings and up to 100% of other earnings, such as pension income.

When a wage garnishment occurs, your employer will be sent a notice to re-direct a percentage of your income. In the case of a wage garnishment issued through Small Claims Court, your employer will direct the earnings to Small Claims Court where it will be held for a period of time, then sent to your creditor. In the case of the Canada Revenue Agency, the funds will be sent directly to The Canada Revenue Agency.

Wage garnishments can not only be embarrassing, but can impact your employment, since your employer is notified and has to ensure that he deducts the money requested from your wages and remits it. This creates an administrative burden, especially in the case of Small Claims Court. If your employer does not garnish your wages as directed by the court, your creditor can ask for a garnishee hearing at the court and the court has the authority to order your employer to pay the amount of your judgement. A wage garnishment issued to your employer alerts your employer to the fact that you have a financial problem. If you hold a position where you must be financially responsible, for example, within the finance industry or a regulated industry that requires a clear financial history, it can create an issue.

If you are self-employed and a wage garnishment is issued by the Canada Revenue Agency, they can send notice to your clients to direct the proceeds of your invoices to them. While it may be more difficult for an employer to use the wage garnishment as cause to dismiss you, it is very common for companies not to want to deal with suppliers who appear to have financial problems.

Financial hardship is one of the major consequences of a wage garnishment. Losing a large percentage of your earnings may result in it becoming difficult to pay the basic necessities of life, such as shelter, food or transportation.

If you have been notified that your wages are going to be garnished, or your wages are being garnished, you don’t have to suffer. There are financial programs available that provide an effective means to stop a wage garnishment. The worst thing you can do if you owe money on a defaulted debt is ignore it. The faster you face the financial problem, the faster you can get back onto a firm financial footing. It can feel confusing and overwhelming when something as serious as a wage garnishment presents itself, but there are financial professionals who specialize in helping people sort out their financial problems.

For more information about wage garnishments, or if you need help to deal with a wage garnishment, please call DebtCare Canada 416-907-2582 or visit