Owing Taxes to the CRA: Real options to consider

The Canadian Tax Filing deadlines for regular filers and for filers with self-employment income are rapidly approaching.

Due to the COVID-19 pandemic, the Canada Revenue Agency (CRA) has pushed out the tax filing deadline for regular tax filers from April 30th, 2020, to June 1st, 2020.  Canadians with self-employment income were due to file by June 15th, 2020, and that date has remained the same.

Any payments for the current tax year are due by September 1st, 2020, which applies to balances and instalments under Part 1 of the Income Tax Act due on or after March 18th and before September 1st, 2020.

If you earned significant self-employment income, for the first time, you might be in for an unexpected surprise when you file your tax return, because there will likely be a balance owing to the CRA. This balance owing is a result of having to pay the amounts that an employer would have normally deducted from your pay, including both portions of the Canada Pension Plan (CPP).

If you haven’t made other provisions to cover your tax debt at the end of the year, you could have a problem.

If this were not a pandemic year and the CRA was fully operational, I would warn that tax debt is serious and should be dealt with immediately.

As we are all aware, the collections staff at the CRA have considerable “power” to find and collect money that are owing to the Crown.

With the amount of government benefits being offered up this year, Canadians have been providing their banking information to the CRA in record numbers, and it is that banking information which the CRA can, and will, use to recover the taxes owing to them, likely in record time.

In effort to deter Canadians from not paying the CRA, they charge penalties and interest (which compounds daily) on your overdue taxes.

They can withhold payment of your Child Tax Credit and GST rebate. They can take money from your bank account or garnishee your wages.

If those methods do not result in full payment of taxes, the CRA will then check to see if you own real estate, as they can register a lien against your property.

When a lien is registered against your property it can prohibit you from refinancing or selling your property until the outstanding debt is paid in full.

You may also find that if you are non-compliant (not filed up to date with the CRA), you may not be able to secure mortgage financing to purchase a home, buy a cottage, get a loan, or access equity in your property.

Many Canadian banks and credit unions will not provide an unsecured loan for the payment of income tax debt and they generally cannot refinance an existing mortgage to cover the debt either. When they learn of a lien, they deem you a credit risk and are more comfortable walking away from you as a customer then take a risk lending you funds that you either cannot pay or that the CRA will end up taking.

 

What Can You Do

Normally, you would contact the CRA immediately – but these are COVID times – and the CRAès collections division is presently not taking collection actions or weighing in on payment arrangements.

Pay what you can, as much as you can.  Because paying anything less than the balance owing is going to result in interest accumulating.

There is no need to pay more to the CRA, unless you absolutely have to.

If these were normal times, you might be able to negotiate a re-payment arrangement covering 3-6 months, but the interest continues to accrue.

 

What NOT to do

This is important to note – filing for bankruptcy, or filing a consumer proposal, does not discharge a lien against your property. If you go bankrupt on your CRA debt, the lien remains and – even worse – accrues interest over time. Even after your discharge from bankruptcy, the lien remains in force, until you eventually sell your home. Transferring a tax problem for a credit problem is not always the best option.

Do not transfer any assets, or your property, to another person. That will not solve your problems, but rather cause other ones.

Removing assets from the reach of the CRA will result in the raising of a Section 160 (325), non-armsè length assessment, which takes your tax debt and makes it jointly and severally liable with the person who now owns your property.

Do not ignore it. Far too often, Canadians ignore the requirement to file and pay their taxes. This means a balance owing to the CRA continues to grow and grow. When the balance gets to be too high, people feel they have very few options, and consider bankruptcy or insolvency to be one of them. Worse that this scenario, is when one of the parties with a large tax debt falls ill, passes away, or becomes separated from the other, and now the ability to resolve the tax matter becomes that much more difficult.

 

A Better Solution

If you are a homeowner then having an experienced mortgage broker working for you can save you both time and money when seeking a solution to your CRA problem. If you simply can’t pay the full amount of your back taxes, consider refinancing your mortgage and using the equity in your home to consolidate all of your debts, including credit card debts, at a rate which might even be better than the rate you are currently paying.

Mortgage brokers have access to lenders that will allow a refinance of your existing mortgage or second mortgage options to pay off outstanding CRA debt.

If you have tax debt, or are going to be facing some tax arrears, do not worry. Contact inTAXicating and let us provide you with the truth around your tax options and help you find the best solution for you.

info@intaxicating.ca

intaxicatingtaxservices@gmail.com

 

Canadians Must Hold Governments Accountable For Their Spending of Tax Revenue

The average Canadian family’s largest expense is taxes.

Therefore it should not be unreasonable that Canadians expect all levels of government to not waste their tax dollars, money taken off their paychecks and paid into the system.

Whether tax dollars are wasted when a government pays a negotiation bonus to unions, or if they have to pay private companies a fine after breaking contracts with them, governments must do a better job at keeping the optics above-board and avoid $200,000 moving expenses or $1300 a person dinners altogether!

But they don’t, or they can’t, and we, as Canadians have come to expect that from our elected officials.

If governments want to spend fast and loose with money, let it be their own, or at the very least taxes off of non-Canadians – like withholding taxes, or something of the like.

But if we, as Canadians do not hold these governments accountable for their spending of our taxes, we allow them to continue to do this and they will continue to do so.

If we held our elected officials to a higher standard and used the opportunity to remove governments who wasted taxpayer dollars immediately, it would send a message to the next government that they have to spend wisely.

This information came out in the late summer months from the Fraser Institute, an economic think-tank.

To clarify, when referring to taxes, its not just income taxes, but all the taxes Canadian Taxpayers make to all levels of governments (federal, provincial, and local), including both visible and hidden taxes— everything from income taxes, which are less than a third of the total, to payroll taxes, sales taxes, property taxes, health taxes, fuel taxes, vehicle taxes, import taxes, alcohol taxes, and much more.

In a recent report published by the Fraser Institute, they tracked the total tax bill of the average Canadian family from 1961 to 2014.

For 2014, they estimated that the average Canadian family (including unattached Canadians) earned $79,010 in income and paid $33,272 in total taxes—or 42.1% of income—while just 36.6% went to food, clothing, and shelter combined.

Indeed, Canadian families spend more on taxes than the basic necessities of life.

But it wasn’t always this way.

Back in 1961, the first year the Fraser Institute started tracking this data, the average Canadian family paid a much smaller portion of its household income in taxes (33.5%) while spending proportionately more on the basic necessities (56.5%).

Since 1961, Canadians’ total tax bills have increased by 1,886%, dwarfing increases in shelter costs (1,366%), clothing (819%), and food (561%). Even after accounting for inflation (the change in overall prices), the tax bill shot up 149.2% over the period.

And now taxes eat up more income than any other single family expense.

So why should Canadians care, aside from the fact that we work really hard to earn an income, and pay these taxes?

With more money going to the government, families have less to spend on things of their own choosing, whether it’s a new car, technological gadget, or family vacation. They also have less money available to save for retirement and their children’s education, or to pay down household debt.

While there’s no doubt that taxes help fund important government services, the issue is the amount of taxes that governments use compared to what we get in return.

To make an informed assessment, you must have a complete understanding of all the taxes you pay. Unfortunately, it’s not so straightforward because the different levels of government levy such a wide range of taxes—with many taxes buried in consumer prices and hard to discern.

Armed with this knowledge, we can hold our governments more accountable for the resources they extract and continue a public debate about the overall tax burden, the amount and scope of government spending, and whether we’re getting our money’s worth.

Otherwise, taxes will continue to increase.

So why is this important to us?

It is important because we understand that taxation is a necessity in order to have a healthy, wealthy, productive society for everyone, and in paying taxes there are circumstances which arise that make the system disadvantages to some Canadians.

Unlike our neighbours to the south who shoot elected officials for spending money, we are much more in control of our emotions (plus, no guns, eh?) so we need to hold them accountable in different ways, such as, not re-electing them. and going to public debates, and letting the officials that we elect know that they can no longer waste our money!

We can fix this.

Tax Debt, Tax Arrears, Taxes Owing to the Canada Revenue Agency (CRA). Call it what you want, but it is ruining your life!

Do you have tax debt to the Canada Revenue Agency (CRA)?  Tax arrears causes stress each and every day on you, your business and your family? Even if you are in an arrangement with the CRA, they can change their mind on a moments notice and want more.  Knowing that the CRA can take all your money, or close your business at any time for your Tax Debt cannot help you sleep at night…

Everybody has answers for you which best suits themselves or their business.

We have a solution that best suits you and your business.

It’s called the Debt Diagnosis, and it’s a service we provide that no other tax solution / tax resolution / tax negotiator can provide.

Our Debt Diagnosis Program looks at the specifics of your CRA debt, your other debts, your current compliance situation, your assets, liabilities, ability to pay, and a whole bunch of other factors and we provide you with your options, suggestions and recommendations regarding how to proceed with your CRA debt(s).

We’ll advise you about options – options you know about already, like the CRA’s Taxpayer Relief Program, and the CRA’s Voluntary Disclosures Program – and we will tell you about options you don’t know about, and you won’t find in writing, because the CRA doesn’t want you to know about them.

As a former CRA Collections Senior Officer – who spent almost 11-years collecting primarily business taxes – GST/HST, Payroll, Corporate Tax, and Personal tax – and managing CRA Collections staff – I understand Director’s Liability, Non-Arms Length Assessments, Write-Off’s, Payment Arrangements, Taxpayer Relief, and everything else to do with collections better than anyone!

I created the Write-Off checklist that many CRA office’s use to write off their accounts.

I have resolved files that the CRA never thought they would collect on, while I was working at the CRA, and working outside the CRA.

Knowing the ins and outs of the CRA’s Collections division helps you!

Remember this: Getting in to Tax Debt takes time. Getting out of Tax Debt also takes time!

If someone is offering you a quick solution, then they are trying to get you into Bankruptcy, or filing a Consumer Proposal.  Insolvency firms are creating “tax” centres to “help” you with your tax debts.  They offer prompt resolution of CRA Collection actions, such as; Requirements to Pay and Wage Garnishments because if you go bankrupt the CRA cannot collect their debts… Most of the time.

Learn what options you have, which are specific to your Tax Debt / Tax Compliance matters.

The CRA has options available for Taxpayers who cannot pay their debts.

Use those, instead of trading Tax Debt for Credit Problems.

Talk to us at inTAXicating!

Find us @ http://www.inTAXicating.ca

Email us at info@intaxicating.ca

Learn the plan to take control of your Tax Debt, and all your other tax-related / debt-related issues and get moving in the right direction today.

There is no need to run to a trustee.

Or spend thousands and thousands of dollars to a firm who is going to promise solutions – tell you the CRA won’t budge on their position – and then tell you that the best option is to go bankrupt.

Get started on resolving your tax debt(s) today.  The CRA still works in the summer!

http://www.inTAXicating.ca

 

You Filed Your Tax Return to the CRA. You Owe CRA Money. Now What?

You have filed you Canadian personal tax return by the April 30th deadline and you owe the CRA money.  Now what?  You have heard horror stories about how the Canada Revenue Agency goes about collecting taxes dollars.

You need to act fast, right?

Well that is exactly what is wrong with tax-filing season in Canada.

What about if you owe more to the CRA because you already have a balance, or if you happen to be self-employed and you plan on having your tax returns prepared after the April 30th deadline, but before the June 15th deadline for self-employed Canadians, and you find out that you owe money to the CRA?

Or, what if you carry a balance year-over-year because between taxes owing and installment payments, you just can’t keep up?

What do you do?

What are your options?

If you listen to the radio, you are likely to have noticed that about every 3rd ad is a commercials talking about debt.  In these commercials, very calm voices talk about how it feels to be in debt and how they a simple solution for debt.  They even refer to “programs” which are supported or endorsed by the Canadian government. and in 10 minutes / 15 minutes / 20 minutes, you too can be debt free.

It’s convenient.  Too convenient…

Their solution is bankruptcy or a consumer proposal, and their solution is a great way for you to no longer have debt owing to the Canada Revenue Agency, or your credit card provider, etc.

What they fail to mention, is that you are paying them money to trade your debt problem for a credit problem.

Sure, you won’t owe the CRA any more, but now that the euphoria of that “win” has worn off, you now have to face reality that you have no credit for 3-7 years at best.  During that 3-7 years, you won’t have a credit card unless it’s a prepaid one, and you won’t be able to get a loan, and you cannot be the director of a corporation.

During that period where you are under a  proposal or in bankruptcy, the CRA can, and still will raise assessment where they are allowed by law to, such as raising s160/s325 assessments for assets transferred to avoid paying the CRA, or if you act as a director even though the director is someone else’s name.

Forget about it if the CRA has already placed a lien on an asset.  That survives a bankruptcy.

But the commercials make it sound SO appealing, so quick, and so good.

I’ve always felt that bankruptcy and Consumer Proposals are great options for people with no options.  If your debt is tax-related then you really should know what your options are before jumping at the first thing you hear and making these Trustee / Insolvency firms rich, so they can advertise even more, but up bigger billboards and open their own “tax solution” businesses to “help” you with your tax problems.

Don’t fall for the easy way out, because you get way more than you bargained for!

Instead, contact us, inTAXicating, and let us diagnose your debt, and tell you the best options for you, and not what works best you the trustee or the CRA.

http://www.intaxicating.ca

inTAXicating is now a Certified Profitable Giving Specialist! What That Means For You…

Warren Orlans, the Director of inTAXicating Tax Services has completed his Profitable Giving Specialist accreditation which certifies that he is able to demonstrate understanding and proficiency in each of the following 4 areas;

  • The Tax Shelter Industry in Canada
  • The Regulations: Promoter Liability and Penalties, Third Party, and Civil Liability
  • Registered Profitable Gifting Arrangements and the Law
  • The Role of the Canada Revenue Agency in Regulating RPGAs

In addition to assisting Canadian Taxpayers who have fallen victim to Tax Shelter scams like the Global Learning and Gifting Initiative (GLGI), the Canadian Organization for International Philanthropy (COIP), the Relief Lending Group (RLG), Mission Life Financial Inc (MLF), Pharma Gifts International (PGI) and Integrated Receivables Management Inc / Integrated RM Inc (IRM).

inTAXicating provides Canada’s only full tax solution to assist Canadians solve all of their tax problems, including ones brought on by participating in tax shelters.
Below is only a snapshot of how to view a CRA debt related to a Tax Shelter / Gifting Arrangement and some of the options to start resolving the issue(s).
In order to reach a solution for Canadian Taxpayers the following things must be considered;
  1. Ability to Pay according to you and,
  2. Ability to Pay according to the CRA.

From there, you have only a few options;

  1. Do nothing
  2. Resolve the balance outstanding
  3. Fight the CRA

Should you choose to resolve the balance outstanding, you again have only a few options;

  1. Pay the balance in full
  2. Ask the CRA for a payment arrangement, and prove you need one
  3. Wait for the CRA to take it from you.
  4. File a Consumer Proposal
  5. File for Bankruptcy.

Keep in mind that the CRA does not “settle” debts like the IRS does.  The only way to “settle” or pay less than the full amount of tax, penalties and interest, is through bankruptcy or a proposal.

While all of the Collections matters are in process, you are entitled to file for Taxpayer Relief and ask the CRA to return some or all of the penalties and / or interest which it has charged you.  This application should be devoted time and effort to complete.  It should never be a cookie-cutter application written by someone else because the CRA sees those and mass-denies them.  Anyone trying to sell you a cookie-cutter application knows this and is “helping” you for the money and not because it’s the right thing to do.

Taxpayer Relief does not hold back Collections for doing what Collections does – trying to collect a balance owing – nor do CRA Collections care that a Taxpayer Relief application has been submitted.

A CRA review of a Taxpayer Relief Application can take upwards of a year.  Be prepared for that delay and the interest that accumulates on your tax account should you wait to pay it later.

Having a trained set of eyes look over and edit a Taxpayer Relief application is a great idea because if you’re taking the time to submit an application, you want to make sure that you are putting your best work forward.

But ultimately, when looking at your options… All of your options, you want to make sure that your interests are being looked after first.  You need an expert in CRA Collections, in Tax Shelters, and who can assist you with accounting, refinancing, insolvency and proposals and who can give you the best advice, the most cost effective advice and the advice that they would take if they were in your shoes.

inTAXicating Tax Services is that organization and we’re here to help you with all of that, and so much more.  We associate ourselves with like-minded professionals who also understand that you are the client and that you need assistance and service.

If you have any questions about any tax shelter that you may have been involved in, and you need to know your specific options, contact us at info@intaxicating.ca

 

CRA Debt? Don’t ask CRA if you are Insolvent.

Insolvent or Tax Troubles?  Don’t Let the CRA Decide!

In my experiences which includes almost 11-years working in the Canada Revenue Agency (CRA), you should never allow the CRA to decide whether you can fix your tax problems or whether you should go bankrupt.

From the stand-point of a CRA Collections officer, going bankrupt is great because it removes the account from their inventory of accounts to collect / resolve.

Your file disappears from their inventory and re-appears in the CRA’s Insolvency Unit inventory.

From the perspective of the Collections Department, it’s case closed!

 

There are 3 ways a CRA Collections Office resolves one of their accounts;

1) Collect it / fix the compliance issue(s)

2) Write it off because they cannot collect it

3) Move the account to the Insolvency unit

 

Go Bankrupt!

The CRA’s Collections Officers are not allowed to tell you to go bankrupt. In fact, they are taught in their training that they are not allowed to do that, and that sentiment is reinforced at all future training they attend.  As someone who trained CRA Collections staff for 5-years, I can confirm this fact.

Collections staff are not allowed to even suggest that you go bankrupt.  They might confirm it, but that’s all they can do.

What CRA Collections can do, however, when they feel you are insolvent, is to force you into bankruptcy via their collection actions, which include but are not limited to;

  1. Bank garnishment
  2. Wage garnishment
  3. Lien on a property
  4. Enhanced garnishment to accounts receivables (in the case of a business)

All the while, why applying these garnishments, the CRA refuses to release the hold on the accounts.

They freeze every source of income that you might have and you are faced with the decision to come up with the funds to pay them, or file for a proposal or an assignment in bankruptcy.

In some cases, a bankruptcy is unavoidable and the right solution, but not in every case, which is why I strongly recommend speaking to someone who is looking after your interests first and foremost.

There are tax-related companies who are fronts for insolvency firms, so they might appear  to want to help you, but they want you to file for bankruptcy, and there are other tax-service firms which gather your information and they unable or unwilling to help you, pass you along to a trustee.

You don’t want or need either of those.

You need a tax firm which has the experience in CRA’s collections, and who have the relationships with not only Insolvency firms, but mortgage brokers, reputable accountants and investment professionals so that you’re options are laid out for you to decide the best option.

Not the CRA.

In order to resolve your tax issues you need to disclose the details so your options can be determined, and you need your tax help to do the same.

Ask your tax-help the following questions;

  1. Are you committed to finding me a tax-solution first.
  2. If that solution is not going to be accepted by the CRA, what other options do you feel would work.

Don’t be weary if a firm wants to charge you a small fee to diagnose and plan out your solution.

You should be weary if they want to charge you a significant amount of money to diagnose it  and not give you a plan.  If they want to keep the plan a secret, and not educate you along the way, it’s because there is no plan.

Likely their solution it to drag you along the process knowing that the CRA will come along and lower the boom and then suggest to you that your only option is to conveniently have them file bankruptcy for you.

Don’t ask the CRA if you should go bankrupt.  You might not like the answer.

If you owe money to the CRA and you’re not sure if the debt is a tax matter which can be resolved, or if bankruptcy or a proposal are better options, just ask!  Send an email to info@intaxicating.ca and let’s talk!  We’re here for you.

Proposals Not Just For Marriage

Most people are familiar with the concept of bankruptcy. Creditors are owed money, assets are liquidated and the liquidation proceeds are paid to creditors. The process is usually very difficult for the person filing bankruptcy as his/her assets may consist of a family home or a cottage, which possibly has been in the family for generations. The disruption can be devastating for the family and their children.

The Bankruptcy and Insolvency Act (BIA), the federal statute that governs bankruptcy and restructuring in Canada, provides an option other than bankruptcy.

The BIA allows an insolvent person whose aggregate debts are less than $250,000 (not including mortgages on residential property) to file what is known as a “consumer proposal”. A consumer proposal is not the same as bankruptcy, even though they are both governed by the same laws.

A consumer proposal is a formal settlement between a debtor and his/her creditors of all unsecured debts for an agreed upon amount. The settlement does not have to be for the full amount of all debts but can be for a fraction of the total owed. The debtor makes one monthly payment to the administrator of the proposal, who in turn makes dividend payments to the creditors.

More specifically, a person who is unable to meet their monthly debt payments meets with a qualified professional, who administers consumer proposals, and they discuss the ability of the debtor to make monthly payments. Together, they review the monthly income and expense statement of the debtor, as well as his/her net worth, to determine how much the debtor is able to pay each month. Once a monthly amount is determined the administrator notifies the creditors and helps to finalize a settlement agreement between the debtor and the creditors. Fifty percent (in dollar value) of the creditors must vote to accept the proposal for it to become binding on all.

The main difference between a consumer proposal and a bankruptcy is that in the case of the proposal the debtor’s assets are not liquidated. The debtor receives the same protection from creditors and collectors but retains control of his/her assets. The two obvious benefits are that there is no loss of assets and no family disruption.

One might ask “Well why don’t I just call all my creditors and work out my own settlement?” This will not necessarily work because, for example, if you have five creditors and you are able to settle with only
three of them, the remaining two are not forced to settle. They can still pursue you for the amounts they are owed. In a consumer proposal, all creditors are dealt with together and receive the same payment plan. As consumer proposals are governed by federal law, any settlement is enforced by the courts and creditors are required to accept the settlement in full and final satisfaction of all debts. So the debtor gets to keep his/her assets, he makes monthly payments to satisfy all debts over time and the creditors receive payments, which are greater than what they would have received if the debtor had filed bankruptcy.

Consumer proposals comprise an increasingly large percentage of overall personal insolvency filings in Canada. For records ending November 30, 2010, 31% of all consumer insolvencies in Canada were
consumer proposals. This is up dramatically from ten years ago when the majority filed for bankruptcy, having had no knowledge of the alternative.

In today’s economic environment, it’s important that people know what options they have to deal with debt. Canada’s insolvency laws mean that today, “Proposals are not just for marriage anymore”.

 

Reference:
Office of the Superintendent of Bankruptcy. Insolvency Statistics in Canada – November 2010. Retrieved 2011, from http://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br02528.html

TODD HOWELL
Todd Howell is a licensed Trustee in bankruptcy and has over 13 years of experience in the bankruptcy and insolvency field. Todd is also a certified Insolvency Counsellor and a member of the Canadian
Association of Insolvency and Restructuring Professionals.

Connect with Todd at: 416.963.7198 or todd.howell@crowesoberman.com.
http://www.linkedin.com/in/toddhowell1

 

 

This article was originally published in Crowe Soberman’s quarterly business newsletter – Comments and is intended for clients of the firm. inTAXicating has been granted permission to repost this article solely for informative purposes. Should you require any assistance, we encourage you to contact the author(s) toll free at 1.877.929.2501, or in the GTA at 416.929.2500.

 

More articles can be found here; http://www.crowehorwath.net/SOBERMAN/services/advisory/Personal_Insolvency/Personal_Insolvency.aspx