Canada Revenue Agency Got You Down? Here Are Some Tips for Dealing with the Tax Man

Owing money to the Canada Revenue Agency is by far one of the scariest financial challenges that many Canadian taxpayers face. The Canada Revenue Agency is not an average creditor because they are part of the federal government. They have significant authority with respect to enforcing tax compliance and collecting tax debts.

This authority includes (without a court order or notice to you):

1.      Pursuing criminal charges under the Income Tax Act

2.      Imposing penalties

3.      Imposing interest

4.      Notionally assessing your income even when you don’t file a return

5.      Garnishing your wages

6.      Freezing your bank account

7.      Placing a lien on your home

8.      Placing a lien on other property

9.      Garnishing your company’s receivables, and more….

The Canada Revenue Agency can be ruthless. If you have a tax debt that you can pay, you must be very careful. The Canada Revenue Agency may seem amiable and willing to make a payment plan with you. They will send you a request for financial disclosure. On the financial disclosure you will have to tell them where you live, where you work, provide all sources of income, provide all assets, banking information and more... You may complete this form being open and honest indicating all of your liabilities and payment and then based on what cash flow is left, promise a payment plan.

Once the Canada Revenue Agency receives your financial disclosure they will know all of your assets, where you bank, where you work – you will be completely exposed. Also, when the CRA reviews your budget and sees payments to other creditors like loans and credit cards, they will exclude them from the budget and ask you for significantly more in terms of a monthly payment than you are comfortable with.

This will leave you in the worst position – Who do you pay? What about your credit? What about your family? What about your job? This is how the human aspect of having a tax debt can be sometimes even more impactful than the financial consequences. Many taxpayers suffer with medical problems that stem from stress associated with an inability to pay a tax debt.

Listen, you cannot draw blood from a stone and there are many reasons why Canadian taxpayers find themselves unintentionally in trouble with the Canada Revenue Agency. A good financial consultant can guide you through programs that are available that can stop CRA collections and help you deal with your tax debt. Attempting to negotiate directly with the CRA will often lead to increased exposure so the best thing you can do if you have a tax debt you can't pay is seek professional help.

If you need help with a Canada Revenue Agency tax debt contact DebtCare Canada online or call 888-890-0888.

How to Deal With a Frozen Bank Account as a Result of a Canada Revenue Agency Tax Debt

When an individual or business has a tax debt owing to the Canada Revenue Agency, the Canada Revenue Agency will begin to pursue enforcement action to collect the debt. One method that the Canada Revenue Agency uses to collect debt is by freezing a bank account. 

A frozen bank account can be extremely disruptive and can cause incredible financial hardship. Many people feel blindsided when they go to the bank and find out that the bank has frozen all of the funds in their bank account. However, a frozen bank account that is the result of a tax debt generally doesn’t occur without warning. 

A Canada Revenue Agency collection practice usually is as follows:

1.       First you will be notified in writing that a tax debt is owed.

2.       Second, you will be sent another letter demanding payment of the tax debt.

3.       Finally, a “Requirement to Pay” letter will be sent to you and your bank, requiring the bank to freeze your bank account.  

When the “Requirement to Pay” letter is issued and sent to the bank, the bank must freeze the bank account indicated. The bank will then hold the money that is in the frozen bank account for 30 days and then will send the money to the Canada Revenue Agency.

The frozen bank account (even after the money has been sent to the Canada Revenue Agency) will remain frozen. Outside of losing all the money that was in the frozen bank account, the frozen bank account will now cause significant disruption because if your pay is directly deposited into the frozen bank account, the bank will continue to seize the money deposited into the frozen bank account and send it to the Canada Revenue Agency.

Once the CRA has frozen your bank account, you will almost always have to open a new account with another institution. Generally speaking, once the CRA has frozen a bank account the account holder will also see that the relationship they once had with their bank has been severely damaged. Most banks will stop offering credit and may even close existing credit products if they become aware that a customer has a tax debt owed to the Canada Revenue Agency. This is because some people who have tax debts end up filing for bankruptcy after being put under the pressure of CRA enforcement action.

Of course, if you have a tax debt and your bank account has not yet been frozen, it is advantageous to act before things come to that. Acting now doesn’t necessarily mean coming up with money you don’t have to pay off the tax debt. Acting now means seeking out professional guidance to deal with your tax problem before things get that far. If your bank account has been frozen you still have a chance to get your account unfrozen.  Getting a bank account unfrozen is difficult but can be achieved through programs that involve legislation that carries the power to stop certain collection actions, such as a frozen bank account.

If your bank account has been frozen or if you owe money to the Canada Revenue Agency that you do not have the means to pay, we can help – including getting your bank account unfrozen and coming up with a plan to deal with your tax debt. Contact DebtCare at 416-907-2582 or visit www.debtcare.ca.

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 www.debtcare.ca

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 

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