I Owe CRA a Lot of Money and I Can’t Pay

Now What?

When you owe the government money, it can be overwhelmingly stressful.  It doesn’t matter if it is for taxes, student loans or even Medical Service premiums.  Most consumers assume that the government has an endless means available to them to collect the debt.

The Government of Canada, through its various departments of the Canada Revenue Agency (CRA), are responsible for the issuance of income tax refunds, pension and old age security, GST/HST and provincial credits and other government issued income sources.  When you owe the CRA money, there is concern that any collection action will result in loss of income and will leave an individual without sufficient resources to meet their basic living expenses let alone any other debt payments.

What Can They Do to Me?

CRA has the right to proceed with collection action without a Court Order.  It can be as simple as issuing a Requirement to Pay to your employer (garnishee) or a Set Off Notice to the department that issues CPP benefits.  In essence the government can:

  • Garnishee your wages up to 50 percent of gross earnings of employment income (usually it’s at least 30%);
  • Garnishee up to 100 percent of self-employed income (especially if you owe GST or payroll deductions);
  • Put a freeze on your bank account and seize the funds on deposit and continue to seize subsequent deposits;
  • Withhold certain tax credits such as GST/HST refund cheques and set those credits off against the debt;
  • Arbitrarily assess any unfiled income tax returns and apply penalties and interest to the debt owing; and
  • If you are a homeowner, file a lien on your property that would ensure the debt is paid if the property is sold.

Why would this occur?

These actions will usually be taken by CRA when the following occurs:

  • The tax debtor has ignored their obligation to pay the taxes owing;
  • The tax debtor has ignored all phone calls and letters from CRA requesting contact;
  • The tax debtor is non-compliant in their tax filings leading to arbitrary assessments;

To avoid collection by CRA, you need to file any outstanding tax documents and continue to file your income tax returns on time each year. CRA is big on tax compliance.  It’s not illegal to owe them money but it is illegal not to file your returns.

This will help you improve your situation by complying with the tax laws. It also helps you determine how much debt you owe them.

Once the amount is determined, you can figure out how you’re going to pay them and also know how much you should be sending them each month for next year’s tax debt so you do not continue to have debt owing year after year. Sending them the money monthly avoids the temptation to spend it and   will help stop the cycle of owing taxes every year.

After your returns have been filed, start making some meaningful payments towards the debt.  The CRA may ask you to provide various documents to help them determine a suitable monthly payment. This may include an income and expense statement that outlines your other financial obligations.

Expect to sacrifice some of the niceties of life, such as recreation or vacations, to get this debt under control.  This applies not to just CRA debt but also to other debt.

And finally, make sure you stick to the payment plan that was agreed. CRA wants to see a concentrated effort and compliance with the income tax obligations.  Whatever you do, don’t enter into a payment arrangement that you can’t keep.  You will miss payments and CRA will start collections once again.

They Want More Than I Can Reasonably Afford

Despite your best intentions to pay the debt, sometimes it is not enough when you owe a lot of money to CRA.  It may be the amount of the debt is just too high or perhaps the budget does not allow for a monthly payment.  If that is the case, it is recommended you speak to a Licensed Insolvency Trustee (“LIT”) to discuss your options.

LITs are debt professionals and can assess your financial situation to determine if a bankruptcy or proposal is the best choice to allow you to make a fresh start. In most cases, debt owing to CRA can be included in a bankruptcy and proposal. With a few exceptions, CRA is treated like any other creditor in insolvency proceedings and must stop their collection activity once a bankruptcy or a proposal is filed.

An LIT can also provide continued support to make sure that you are not at risk for incurring future tax debt through the two mandatory counselling sessions.

Beware of Scams

Scammers posing as Canada Revenue Agency (CRA) employees continue to contact Canadians, misleading them into paying false debt. These persistent scammers have created fear among people who now automatically assume that any communication from someone representing the CRA is not genuine.  To be sure that it is not a scam, review this website as to what CRA will and won’t do.

Contact one of the Licensed Insolvency Trustees at Boale, Wood & Company Ltd. for a free consultation.  We will be able to advise you on what solutions are available to help you address the problem.

Call us.  It’s not too late. (604) 605-3335.


Self-Employed and Can’t Pay CRA?

stopwatch with the word tax printed on the dial

The June 15 deadline for self-employed individuals to file their 2018 tax return has come and gone.  And if you don’t have the funds to pay your tax bill you are probably wondering what can be done.

If you owe taxes and are struggling to come up with the funds to pay the Canada Revenue Agency (“CRA”) you need to speak with us right away.  Don’t delay.

There are debt advisors out there who state that they can “settle” or “reduce” a tax debt with Canada Revenue Agency. If it sounds too good to be true, then it probably is.

They don’t “negotiate” and they don’t “settle” tax debts. CRA is not your typical creditor.  They didn’t choose to lend you money and become a creditor.  They become a creditor by virtue of the self reporting tax system we have.  And they want to be paid. In full.

They are not business people in the traditional sense.  Collectors have no authority to settle or reduce a tax debt save and except for circumstances governed by the Income Tax Act or the Bankruptcy and Insolvency Act.

They also have extraordinary powers.  This would include issuing garnishees to banks, investment sources, and to your customers. They file liens and writs on a daily basis.

CRA uses a number of methods to try and collect the tax debt:

Firstly, CRA collections will demand payment. If you pay, all further action stops. If you don’t pay, the collection action gets stepped up a notch.  There is no negotiation over how much you owe. The collector has no authority to do that.

If you fail to pay, the agent assigned to your case will begin contacting you to try and find out as much as they can about you.

Once you have engaged in a dialogue, the agent may try to negotiate with you if you provide further information. They may offer to consider a payment plan. They will provide you with a financial disclosure form asking you to disclose where you live, work, bank, monthly income and expenses, debts, and assets.

Payment plans are based on essentially two things;

  1. Income available over and above basic household needs or in the case of a business, monthly operating costs.
  2. Your ability to borrow or liquidate assets to satisfy the debt.

Lastly, if you can’t make the payment, for whatever reason, the CRA collections department will take action. Remember that financial disclosure form? It now proves very handy for that agent:

  • Your banking information will be used to freeze your account;
  • Your employment information will be used to garnish your wages;
  • Your housing information will be used to place a lien on your home.

So when you hear debt advisors saying they can settle the debt.  Be careful.

So, the best way to meet that debt head on is to take control. Licensed Insolvency Trustees are the go to professionals of choice when dealing with debt.  We are mandated to explain all of your options to you.

The experienced professionals at Boale, Wood & Company Ltd. understand the stress that financial difficulty can cause.

We know that realizing that you are experiencing financial problems is a hard thing to do for most people and sometimes you feel helpless. But instead of feeling helpless, let us help you gain control of your debts and understand your options.

Start by scheduling a meeting with us to discuss the solution best suited to your situation. This meeting is free and there is no pressure or obligation for you to make a decision right away.

We have the expertise to find the solution best suited to you.

Call us, it’s not too late. (604) 605-3335.







Three Common Tax Mistakes

Headline: 3 of the tax mistakes you’re most likely to make, according to the CRA.

Via: Global News


Scammers using text messages claiming to be CRA

Headline: Fraudsters pose as Canada Revenue Agency in tax season text message scam.

Via: Global News

CRA Looking at Undeclared Income from Tips

There have been a couple of stories recently about Canada Revenue Agency taking a closer look at the hospitality industry – specifically undeclared income from tips.

With more people paying, an tipping, electronically, it’s easier to track the level of tipping being paid vs. what’s being declared.

See these stories:

Headline: CRA cracks down on undeclared tips for restaurant and bar staff.

Via: Globe and MAil

Headline: Audits of food servers will continue “until an improvement in compliance is noticed.”

Via: Huffington Post Canada



Insolvency and Taxes, the Real Facts

A common misconception – Income taxes are not included in a proposal or a bankruptcy.

False! Income taxes and almost all other debts are included in a bankruptcy or a proposal, including any debt one might owe to the tax department as a result of being a director of a corporation.

Sometimes, despite their best efforts at financial management, Canadians get to a point where they simply can’t pay their debts as they become due. Whether due to inability to pay taxes, problems with a business, loss of employment, unexpected financial obligations or other unplanned factors, they become insolvent. They need to seek the advice of a Licensed Insolvency Trustee, who can inform them about their options.

There is another misconception in Canada that there are government programs that allow you to enter into payment arrangements with your creditors. In reality, there are no such programs. There is, however, legislation that allows you to compromise your debts.  For consumers, that legislation is the Bankruptcy and Insolvency Act.

There is an abundance of misleading information about credit and debt repayment programs in the marketplace and on the Internet. Many unlicensed and unregulated non-trustee firms use phrases such as “Avoid bankruptcy” or “We can help reduce your debt to one monthly payment,” common themes that you read about in advertising all the time.

Other organizations that offer “credit or debt consolidation”, payment programs or some form of debt relief are in the business of helping you organize your payments and thus charge a fee for their service, whether they tell you up front or not. Even non-profit programs charge fees. The fees charged by these firms differ from company to company and are not to be found anywhere in their promotional material. The fees of a Licensed Insolvency Trustee in a consumer proposal and in a bankruptcy, are set out in the Rules of Bankruptcy and Insolvency Act.  In other words, all Licensed Insolvency Trustees get paid the same fee.

While non-trustee firms will offer to help an individual avoid bankruptcy, in many cases all that is happening is the inevitable is being delayed or you will be put on a debt repayment program that is so onerous you may eventually default on it and be worse off than when you started. And if you owe any government agency money, including Canada Revenue Agency a tax debt, none of these programs will work.  Government debt can only be dealt with by a Licensed Insolvency Trustee. Remember, if it sounds too good to be true, it probably is.

As well, the majority of these companies have no government oversight, no professional association, no regulatory body and no code of ethics. Licensed Insolvency Trustees have all of these.

The thought of meeting with a Licensed Insolvency Trustee can make people uncomfortable because of the social stigma attached to the word “bankruptcy”. The typical consumer is often unaware of the role of the trustee and the options these professionals can make available for dealing with debt. Unfortunately, that fear will cause many to delay getting the advice they need.

Trustees are highly trained professionals and the only ones licensed by the Office of the Superintendent of Bankruptcy (OSB) who can file a consumer proposal or a bankruptcy.  Despite what you may read on the internet, no one else can help you with these options.

To help ensure that the rules are followed, the OSB is responsible for supervising the process and protecting the public interest.  The OSB is also responsible for issuing operating licenses to Trustees and for reviewing everything that a trustee does, ensuring that every debtor is treated exactly the same and fairly as outlined under the Act.

How to get the process started?

A proposal or a bankruptcy will begin with a meeting between the individual and a licensed insolvency trustee who will assess their financial situation, explain the options available and explain the debtor’s rights and responsibilities. After the meeting, the debtor will have enough information to make an informed decision about the next step. Remember, only a Licensed Insolvency Trustee can file a proposal or a bankruptcy.  Its never too late to get information.

Call us today. (604) 605-3335

It’s not too late.

Do I Need a Lawyer if I am in Debt?

Debt is stressful.  If you are stressed because of your debt, and your income doesn’t meet living expenses and the required minimum payments, you need a plan to get your finances in order.

You may receive harassing phone calls and letters from collection agencies.  You may start receiving collection/demand letters from lawyers threatening or even initiating court action which can lead to wage garnishments, seizure of assets or liens against your property.  Your first instinct is to call a lawyer.  However, is this the right call?

If your goal is to achieve relief from debt stress, prevent further collections actions against you and make a fresh start, a lawyer will likely not be necessary in most cases. You need to contact a Licensed Insolvency Trustee (“LIT”).

LIT’s are licensed and regulated by the federal government through the Office of the Superintendent of Bankruptcy and are tasked with ensuring the legal rights of debtors and creditors are balanced according to the Bankruptcy and Insolvency Act.  LIT’s have the knowledge to guide you through every step of the process to the discharge of your debts. However, you are required to fulfill certain responsibilities, so you can complete the entire process without the Courts ever being involved.

When to Seek Legal Advice

If you are a party to litigation, having legal representation may be necessary.  Though most consumer debt likely could take place in small claims court where you are able to represent yourself, a lawyer’s expertise or guidance might still be of significant required particularly if you are collecting a debt, disputing the debt, or if the matter is complex or highly consequential.   If you don’t dispute the debt and you are only trying to delay matters, you need to speak to an LIT, not necessarily a lawyer.

What about bankruptcy lawyers?

It is rare for an insolvency lawyer to become involved in consumer debt situations, as the focus of their practice tends to involve complex and corporate matters. However, if one or more of your creditors tries to petition you into bankruptcy (involuntary) or objects to your discharge from bankruptcy, then legal counsel may be necessary.  Usually when there is creditor objection to a discharge, the LIT would likely advise you to seek legal advice.  If CRA is the opposing creditor it is likely you need a lawyer, a bankruptcy lawyer, not a tax lawyer.

I owe CRA.  Do I need a tax lawyer?

If you are experiencing tax problems with Canada Revenue Agency (“CRA”) and are burdened with serious debt problems, CRA may be only one of several creditors that you have to deal with.

Why use an LIT instead of a tax lawyer? An LIT can:

  • Provide you with a full financial appraisal of your situation;
  • Deal with all of your debts while a tax lawyer only deals with your CRA debt; the rest remains;
  • Advise you on insolvency alternatives which include Division I proposal or consumer proposals , credit counseling and debt consolidation and, as a final option, bankruptcy;
  • Provide immediate protection with a Stay of Proceedings by filing a Division I Proposal, Consumer Proposal or an Assignment in Bankruptcy;
  • Advise what amounts are payable under the statute;
  • Be less expensive than using a tax lawyer because in many cases the Trustee doesn’t charge a fee over and above what the Bankruptcy and Insolvency Act requires to be paid;
  • Save you money because the actual amount required to settle using a lawyer may be higher than what debts could be settled for in a proposal or a bankruptcy;
  • Offer you a free consultation while a tax lawyer usually requires a retainer.

There are a few cases in which you may want to consult a tax lawyer:

  • Your debts chiefly or only involve CRA;
  • You are not insolvent;
  • CRA has registered liens on your property (bankruptcy does not always remove liens);
  • Communication between you and your tax lawyer is privileged; a trustee must seek and make full disclosure;
  • You can avoid a bankruptcy filing and use the voluntary disclosure rules on all of your conduct and transactions;
  • You are being prosecuted by the Department of Justice in relation to your tax reporting and therefore do require a lawyer.

Free Confidential Consultation

LITs are the only debt professionals that can administer proposals and bankruptcies.   Credit counsellors and/or debt advisors are not licensed by the OSB and have no ability to file a proposal or a bankruptcy.  This is despite what they may lead you to believe on their websites.

One of the major benefits of using an LIT is that the filing of a proposal or bankruptcy provides an immediate Stay of Proceedings on all collections actions, wage garnishments and asset seizures being taken against you. They also prevent any future action being taken as long as you honour the terms outlined by your Licensed Insolvency Trustee.

You are entitled to have or seek legal counsel at any time during a bankruptcy, however, it is rarely necessary.

At Boale, Wood & Company, we will provide you with a no charge, confidential, assessment of your financial position.  You should never pay an up-front fee to obtain advice on how to deal with debt or a fee to be referred to an LIT.

Call us.  It’s not too late. (604) 605-3335

CRA Call Centre Slammed by Auditor General

Headline: CRA call centre staff blocking calls, giving taxpayers incorrect information: AG

Via: CTV News