How to Get a CRA Wage Garnishment Removed or Reduced

Imagine that you owe the Canada Revenue Agency (CRA) a lot of money (or maybe you don’t have to imagine) and you’ve been ignoring their collection letters and now the phone calls have begun. You decide to ignore those calls too. Guess what the CRA is going to do next and without any further warning?  That’s right…a CRA wage garnishment!

A CRA wage garnishment is one of the most common collection tools that CRA will use to enforce payment of your outstanding debt. CRA does not need to go to court and get permission before issuing this powerful document. A CRA wage garnishment can be issued at any time once your debt becomes legally collectible (i.e. if you haven’t filed a Notice of Objection to dispute the amount). 

CRA will usually give you one written warning that legal action will commence if they do not receive payment in full within 14 days. Once that deadline passes, all bets are off in terms of what CRA will do next, but whatever they do, it won’t be pleasant.

What does a CRA wage garnishment mean for you? If you are an employee, CRA will issue this garnishment to your employer, directing them to take up to 50% of each of your pay cheques and send it to CRA. Once the garnishment is received, your employer has no choice but to do as CRA commands.  In addition to the financial pain that a wage garnishment will inflict on you, what about the pain of embarrassment?  Now your employer has been made fully aware of all your tax problems with the CRA.   Word will often start to spread throughout your company, and soon most of your colleagues become aware of your CRA problems. 

The best thing to do is to seek help before the problem reaches the point of a garnishment. However, don’t despair if the garnishment has already been issued! There is still an excellent chance to get it reduced or better yet removed all together!  Make no mistake, once CRA has the garnishment in place, they are now in a position of strength and have you at a distinct disadvantage. 

This is where knowing how to properly negotiate with the CRA collector comes in handy. The collector is playing a game – a very serious one – but you don’t know the rules. You do have rights – and CRA cannot keep legal action in place that causes you “undue hardship”.  The key is that you have to prove to CRA what your ability to pay is toward this debt.  If you can only afford $500/month and the garnishment is taking $1,000/month from you, then they are violating their own collection policies!   A voluntary payment arrangement is the way forward with the CRA, but that is easier said than done. Dealing with a CRA collector is not a “do-it-yourself” project.  

Don’t turn to just anyone to solve your tax problem. Call Tax Solutions Canada today for expert advice from their ex-CRA and tax specialists: 1-888-868-1400 FREE.

An Overview of the GST/HST New Housing Rebate

Taxpayers who purchase a new home may qualify for a partial rebate of the GST/HST paid on the purchase.

The GST/HST New Housing Rebate allows purchasers to partially recover the federal and provincial portion of the sales tax that is paid on the purchase price of a new or substantially renovated home that was purchased with the intention to make it the primary place of residence by the purchaser or a qualifying relation. Typically, the New Housing Rebate is claimed by the builder of a new home on the purchaser’s behalf and adjusted in the final purchase price of the property. In some instances, purchasers may file for the rebate independently.

Similar to the New Housing Rebate, taxpayers purchasing a new condo or home to earn rental income may recover the GST/HST paid on the purchase through the GST/HST New Residential Rental Property Rebate, which offers partial recovery of federal and provincial sales tax on new residential rental properties.

Rebate Amounts

New homebuyers in Ontario are charged 13% HST on their purchase, consisting of a 5% federal tax and 8% provincial tax. The New Housing Rebate essentially refunds 36% of the federal portion of the HST (up to a maximum of $6,300) and 75% of the Ontario portion of the HST (up to $24,000). Similar rebate amounts are available under the New Residential Rental Property Rebate.

Eligibility

You may be eligible for these tax rebates if you’ve done any of the following:

·         Purchased a newly constructed home

·         Purchased a new condo

·         Built a house

·         Contracted someone to build a house

·         Substantially renovated a house or condominium

·         Contracted someone to extensively renovate a home or condo

·         Added a major addition to a home

·         Rebuilt a home that was destroyed by fire

·         Bought shares in a newly constructed cooperative housing project

·         Converted a non-residential property into a home

It is important to note that a key requirement for the New Housing Rebate is that the property must be purchased with the intention that the purchaser (or a qualifying relation) will make it their primary place of residence.

In order to qualify for the New Residential Rental Property Rebate, purchasers must ensure that the property is leased for a minimum of at least one year before disposition. The rebate may have to be repaid if the property is sold within one year after it is first occupied as a place of residence and the purchaser is not buying the unit as a primary place of residence for themselves or a qualifying relation.

Pitfalls and Traps

In recent years, CRA has become increasingly aggressive in auditing New Housing Rebate applications. Quite often, purchasers are reassessed many years after receiving their rebate on the basis that they do not meet the conditions necessary to qualify for the rebate. If they believe that you did not stick to conditions, then penalties can be harsh.

Want to learn more about these rebates and if you qualify? Contact Tax Solutions Canada today by calling 1-888-868-1400.

Trying to Negotiate a CRA Payment Plan with CRA Could Lead to Burns on Your Bank Account

You file your taxes, but cash is tight, so you don’t remit payment.  Time goes by and you still don’t manage to pay. You may occasionally receive a statement of account from the CRA, reminding you of your outstanding balance and indicating the amount of interest that continues to increase your taxes owing. More time passes – maybe as little as 90 days from the date your tax return was assessed, or maybe several months or even years.

And then one day you open a letter from CRA Collections, notifying you that you only have 14 days to pay your debt in full, and to contact CRA Collections. The letter warns you that failure to do so will result in legal action. Receiving this letter means that CRA is no longer willing to wait for you to pay your taxes in your own timeframe, and has assigned a collector to your account whose mandate is to get your account paid NOW. So, what do you do?

If you choose not to respond to this letter, you can expect increasingly unpleasant correspondence from the CRA to follow in due course. You will likely receive a form which confirms that the CRA has certified your tax debt in federal court, which is the official pre-cursor to the CRA proceeding with formal legal action against you. Failure to respond to the CRA at this point will most certainly result in legal action being taken. CRA may issue a Requirement to Pay – to your employer (garnishment of wages), to your bank (to freeze and drain your bank accounts), or even to your customers (forcing your accounts receivable to be paid directly to the CRA). The CRA may also register a lien on your home, or on other property you own.

CRA’s authority to impose collection action on taxpayers is vast. Add to this the fact that while some collectors will treat a taxpayer fairly and respectfully, there are many collections agents who will intimidate, threaten or pressure a taxpayer into a payment arrangement which they actually cannot afford, leaving them in even worse circumstance than before.

The CRA’s own Taxpayer Bill of Rights (found at http://www.cra-arc.gc.ca/E/pub/tg/rc4417/rc4417-13e.html) clearly spells out how taxpayers are entitled to be treated.  However, collectors aren’t actually required to inform you of those rights - it’s up to you or your authorized representative to know the boundaries that CRA must respect, even while trying to collect money from you.  Being uninformed puts you in an extremely vulnerable position when negotiating with the CRA - know your rights!

Call Tax Solutions Canada before you call CRA. We can help inform you about your rights as a taxpayer and protect you through the negotiation process. 1-888-868-1400.

Dispute with CRA? To Object or Not Object – That is the Question

So you’ve been audited by the Canada Revenue Agency (CRA) and received a reassessment on your income tax and/or GST/HST returns. You may have even been hit with gross negligence penalties. What do you do? How do you fight the reassessment? Is there any hope?  Yes! You can protect your rights and file a Notice of Objection to settle your dispute with CRA.

A Notice of Objection is a formal dispute resolution process which allows you to make your case that the CRA auditor was wrong regarding your tax situation. The Notice of Objection is your best shot at telling your side of the story and getting some or all of the auditor’s adjustments reversed. 

It is important to point out that the Notice of Objection is not a court-based process and you do not need a lawyer to represent you. However, this doesn’t mean you should go it alone – far from it!  You absolutely should hire a tax specialist who knows how to best present your case in order to give you the greatest chance of a successful outcome.  

Here are some key points to keep in mind about the Notice of Objection:

-       Act quickly!  In most cases, you only have 90 days from the date of the reassessment to file your Notice of Objection.

-       What if I didn’t file within 90 days?  Don’t lose hope!  You have 1 year after the 90^th day to request an extension of time to file your Notice of Objection. Your chances of getting your request granted is better the earlier you make it.

-       What about CRA collections? (Part I) If you are objecting to an income tax issue, the good news is that the objection protects you from the CRA collector.  However, as long as the debt remains unpaid - even while it is under objection - interest will continue to build.

-       What about CRA collections? (Part II) However, unlike an income tax assessment, if you are objecting to an excise tax issue (i.e. GST/HST), the CRA collector will still want their money while you wait to have your objection resolved. 

Let’s say you have been assessed a gross negligence penalty and want to have it removed. Some may ask if they should file a taxpayer relief application instead of a Notice of Objection.  While the Taxpayer Relief Program does review requests to remove penalties, a Notice of Objection would be a much better choice. Why? A Notice of Objection is a formalized process in which the CRA must reverse the auditor’s position if your case is proven to be superior to that of the auditor.  A taxpayer relief application is at the sole discretion of the employee reviewing your file. In the case of a gross negligence penalty, your chances of success are slim as you would have to prove “exceptional circumstances.”  Also, filing a Notice of Objection stops collection action (see below) while a relief application does not.

I often get asked if filing a Notice of Objection is really worth the effort. I can answer that question with a resounding “YES”!  A properly filed and represented Notice of Objection gives you an excellent chance to successfully resolve your dispute with CRA. 

Don’t turn to just anyone to solve your tax problem.  Call Tax Solutions Canada today for expert advice from their ex-CRA and tax specialists: 1-888-868-1400.

Time Limits on Claiming HST Input Tax Credits

When it comes to the Canada Revenue Agency, deadlines are the major source of stress for both personal and business filing. When these deadlines are met, the stress eventually dissipates, but if they are missed, you will often find yourself with lost money or worse, a debt.

GST/HST registrants may recover the GST/HST paid or owed on purchases and expenses related to commercial activities by claiming input tax credits (ITCs). Most registrants claim their ITCs when they file their GST/HST return for the reporting period in which they made their purchases. However, some registrants may have ITCs that were not claimed in their corresponding reporting period. Falling behind in claiming tax credits is not risk free. The Excise Tax Act limits registrants to claim any unclaimed ITCS within four years after the end of the reporting period in which the ITC could have first been claimed.

Example

You are a quarterly filer and you buy office furniture in the reporting period October 1, 2011, to December 31, 2011, for which you can claim an ITC. The due date of the return for this reporting period is January 31, 2012.

The last reporting period in which you can claim an ITC for the tax you were charged on the office furniture is the reporting period October 1, 2015 to December 31, 2015. The due date for this return is January 31, 2016. This means that you can claim the ITC in any return filed by January 31, 2016.

The time limit for claiming ITCs is reduced to two years for most listed financial and persons with annual taxable supplies of goods and services of more than $6 million for each of the two preceding fiscal years (except for charities and persons whose supplies of goods and services, other than financial services, during either of the two preceding fiscal years are at least 90% taxable supplies).

Documentation is key when claiming ITCs. To support your claim for ITCs, the invoices or receipts you use must contain specific information. Poorly documented ITCs may lead to audit troubles down the road.

Failing to file ITC claims within the statutory deadline permanently disqualifies the taxpayer from claiming them. Don’t get stuck with interest and penalties because you got behind the deadline to file - schedule your quarterly filing with plenty of time to spare.

For more information about what to do if you are behind filing your income tax credits please visit www.taxsolutionscanada.ca or call 1-888-868-1400.