Tax problems with Canada Revenue Agency?

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

You may see advertisements from tax lawyers trying to scare you into believing that you need their services to deal with CRA debt, however; consulting with a Licensed Trustee may be a much better option for you. CRA isn’t looking to prosecute you; they are looking to collect money and a Trustee is usually your best option for dealing with debt.

Why use a Licensed Trustee instead of a tax lawyer? A Licensed Trustee 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.

If you’re experiencing serious debt issues, including tax problems with CRA, contact Boale, Wood & Company Ltd. at (604) 605-3335 for a no cost, no obligation consultation.  Call us now to make a fresh start.

** Inspired by my friends and colleagues at Ira Smith Trustee & Receiver Inc.

Can CRA pursue a spouse?

I am an undischarged bankrupt and I owe Canada Revenue Agency (“CRA”) a lot of taxes.  My Trustee has reached an agreement with CRA and given me an amount that will get me discharged. CRA has issued an assessment against my wife regarding the transfer of my share of the ownership of our home to her.  They have made this assessment under S160 of the Income Tax Act.  If I get discharged does CRA still have the right to pursue my wife?

Yes.

If CRA has raised a Section 160 assessment against your wife then it is something she is going to have to deal with.  It is sometimes referred to as a memo assessment as the debt relates to any taxes owing by the bankrupt and subsequently also assessed against the recipient of the property.  Despite your bankruptcy and your discharge, it does not absolve her of this assessment. Any funds that CRA receives from your Trustee in bankruptcy would go to reduce the assessment against your wife.

Your wife should either talk to CRA directly to deal with this matter, obtain independent legal advice to see what her rights are or speak to a Trustee.

Ask a Trustee

If you have something you’d like to Ask a Trustee, use this form to submit your question.

And follow @askatrustee on Twitter

Re-assessed Taxes After Marital Status Change

Canada Revenue Agency (“CRA”) recently changed my marital status from single to common law since my child was born.  Now I’ve been re-assessed and requested to reimburse them for income tax, child tax benefit and GST/HST credits.  Would bankruptcy erase these debts?

Maybe – CRA may pursue you for fraud and misrepresentation, and if successful, then a bankruptcy will NOT clear you of these debts.  However, in my experience, if you file for bankruptcy, it is unlikely that CRA would pursue you for any fraudulent action and any debt that you owe them would be extinguished when you are discharged.

People are often confused by what constitutes a “common-law” relationship.  In BC, the Family Relations Act definition refers to living and having a child together or lived with another person in a marriage-like relationship for a period of at least 2 years.  CRA only requires one year of living together to be considered in a common law relationship for tax purposes.

This case reinforces the view that when you are married or living common law, that you must disclose your partner’s income on your tax returns and vice versa.  This is the case even if you otherwise keep your finances separate and apart.  Family income is what determines the level of benefits that you receive such as Child Tax Benefit, GST/HST credits and other provincial credits that may be available. It also has an effect on the amount of tax you pay if you claim the child as an eligible dependent (which you can’t).  If you don’t disclose your partner’s income, it may lead directly to the above situation.

Ask a Trustee

If you have something you’d like to Ask a Trustee, use this form to submit your question.

And follow @askatrustee on Twitter