income tax – Consumer Proposal & Bankruptcy – Powell Associates Ltd.

COVID- 19 Canadian Emergency Wage Subsidy (CEWS)

admin — Mon, 04 May 2020 16:41:00 +0000

Canadian Emergency Wage Subsidy (CEWS)

Canada Revenue Agency has rolled out the anticipated Canadian Emergency Wage Subsidy (CEWS) and eligible businesses can now begin making their applications online through their ‘My Business Account’ or ‘Represent a Client’, or with a Web Forms application using a web access code.

The CEWS will pay an eligible employer a wage subsidy of up to 75% of eligible remuneration (to a maximum of $847 per employee per week) and paid to eligible employees, for up to 12 weeks, retroactive to March 15, 2020. CEWS will enable employers to re-hire workers previously laid off, to help prevent further job losses, and to better position businesses to resume normal operations following the COVID-19 crisis.

Eligible employers include sole proprietorships, taxable corporations, and registered charities to name a few. In order to qualify for the CEWS, your business must have experienced an Eligible Revenue Reduction. We have reproduced the Federal Government’s table below which shows the remuneration claiming periods, the required reduction in revenue for that period, and the reference period for determining whether the revenue test is met:

Canadian Emergency Wage Subsidy (CEWS)

CRA has an online calculator that will help with an employer’s application.

Eligible employees are individuals employed in Canada by an eligible employer during the claim period, except if there was a period of 14 or more consecutive days in that period in respect of which they were not paid eligible remuneration.

Employees who had been previously laid off or furloughed can become eligible retroactively, as long as they are rehired and their retroactive pay and status meet the eligibility criteria for the claim period.

Eligible remuneration includes salary, wages, and other taxable benefits, fees, and commissions. Severance pay, stock options benefits, or the personal use of a corporate vehicle are not part of eligible remuneration. Baseline remuneration is the average weekly remuneration paid to an employee from January 1, 2020, to March 15, 2020.

Eligible applicants should expect payment within 10 business days if they are registered for direct deposit on their payroll account. In some cases, if additional review is required it may delay payment.

The CEWS is taxable and must include the amount received on annual Income Tax returns when calculating taxable income.

This has been a brief overview of the CEWS program. For more in-depth information, visit CRA’s website.

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.

Once you file a consumer proposal or personal bankruptcy, we deal directly with your creditors on your behalf. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you. Contact us for a free consultation.

We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in-person in Saint John, Moncton, Fredericton, Charlottetown, Dartmouth, or Miramichi.

COVID-19 Economic Response Plan – Income Tax Deadlines Have Been Extended

admin — Thu, 26 Mar 2020 19:00:00 +0000

“To receive your refund in a timely manner you should file your return on or before the deadline and sign up for direct deposit.”

As part of Canada’s COVID-19 Economic Response Plan, the Canadian government has extended the deadline for filing individual tax returns to June 1, 2020. Taxpayers will have until September 1, 2020, to pay any 2019 income tax amounts owed.

The deadline, if you or your spouse or common-law partner carried on a business in 2019 (other than a business whose expenditures are primarily in connection with a tax shelter), is June 15. However, if you have a balance owing for 2019, you have to pay it on or before September 1, 2020.

To receive your refund in a timely manner you should file your return on or before the deadline and sign up for direct deposit. If you are not comfortable giving your bank account info to CRA then you can choose to receive your refund by check, however, this may take longer.

If you owe them

If you owe income taxes it must be paid on or before September 1, 2020, to avoid getting charged interest.

If you have an amount owing and cannot pay it in full by the deadline, you will be charged compound daily interest. Generally, You can make arrangements for monthly payments as long as the debt is paid before the next income tax deadline. Contrary to popular belief, the interest you pay CAN NOT be claimed as a deduction on the following year’s income tax return.

What happens if you’re late?

“You have until June 1, 2020, to file your 2019 income tax return, you can avoid the late-filing penalty by filing your return on time.”

If you owe tax for 2019 and you file your return for 2019 after the due date, you we will be charged a late-filing penalty. The penalty is 5% of your 2019 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.

If you were charged a late-filing penalty on your return for 2016, 2017, or 2018 your late-filing penalty for 2019 could be 10% of your 2019 balance owing, plus 2% of your 2019 balance owing for each full month your return is late, to a maximum of 20 months. “ Yikes! “

A large income tax debt is one of the first signs of financial hardship to come and shouldn’t be ignored. Putting it on your calendar and getting filed and paid on time will save a lot of stress and could prevent bigger problems down the road.

For more information direct from CRA:

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.

Helping families with high energy prices through the 2020 New Brunswick Home Energy Assistance Program

admin — Thu, 30 Jan 2020 17:40:59 +0000

The New Brunswick government is offering a one-time benefit of $100 to help low-income families with their home energy bills.

The New Brunswick government is offering a one-time benefit of $100 to help low-income families with their home energy bills. The government has had similar programs in the past to help families offset some of the cost of heating their residence.

To qualify for this year’s 2020 New Brunswick Home Energy Assistance Program (HEAP) you must meet the following criteria:

2020 New Brunswick Home Energy Assistance Program (HEAP)

Maintain a principal place of residence within New Brunswick at the time of application (either a house, an apartment, or a living unit that is a self-contained domestic establishment with its own access and contains a kitchen, bathroom and sleeping facilities);
Have had a total family income (applicant and spouse or common-law partner) of $30,000 or less in 2018.
Be a resident of New Brunswick as of December 31, 2018, and have filed a 2018 New Brunswick Income Tax Return.
Provide a copy of an electricity bill for your home dated after November 1, 2019. If electricity costs are included in your rent, provide the name and telephone number of your landlord at the time of application.

NB Power also has a low-income program that offers free energy audits and insulation upgrades at no cost to the homeowner. Learn more.

Only one benefit per household will be available and the deadline to apply for the benefit is June 30, 2020.

Application forms are available online at the New Brunswick Department of Finance, or at Service NB locations, or by calling the Department of Finance at 1-800-669-7070.

With the current economic conditions and high consumer debt in the province, many consumers are struggling to maintain payments on their basic expenses. This is one of the warning signs of financial hardship and should not be ignored.

This offer is small but it can help. Take all the help you can get!

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.

We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in person in Saint John, Moncton, Fredericton, Charlottetown, Dartmouth, or Miramichi.

What Happens to Student Loans in Bankruptcy?

admin — Thu, 14 Jun 2018 15:56:04 +0000

It is that time of year again when a new crop of graduates are entering the workforce and when others start considering taking on a loan to pay for school in the Fall.

It is very common that a student who has finished a college or university program will have some amount of student debt. Sometimes, that amount can be significant and can be the source of stress and anxiety.

“owing the government money has its own special consequences”

Student loans, as we define them, are those that are either directly from or guaranteed by a governmental body. If those loans fall into arrears, a debtor is left owing money to the government; and owing the government money has its own special consequences. For example, if you are in arrears for your student loans, the Canada Revenue Agency can begin keeping your annual income tax refunds and quarterly HST refunds. This can be a source of stress for individuals who depend on those refunds.

So what about the honest but unfortunate debtor who needs to file for bankruptcy or a consumer proposal while owing student loans? Student loans have some unique provisions for how they are dealt with in bankruptcy.

Once upon a time, it was a trend for students to borrow large student loans in order to get an education but file for bankruptcy immediately after graduation in order to take advantage of the bankruptcy system. So, the Government got wise to that idea and implemented a ten-year rule in 1998 which was later reduced to a ‘seven-year rule’ in 2009.

If you have been a full- or part-time student in the seven years prior to your bankruptcy or consumer proposal, you will not be discharged from a student loan and payments will resume as soon as you are done.

However, there is some potential relief if your student loan is caught by the seven-year rule. If you have filed for bankruptcy or a consumer proposal and it has been five years since you have been a student, you can make a “hardship” application to the Court to have your student loan discharged.

If you can demonstrate to the Court that you have acted in good faith with respect to the student loan and you will continue to experience financial difficulty if forced to continue making payments, the Court can grant an Order discharging the debt in full.

The strictest reading of the Bankruptcy and Insolvency Act does not specifically deal with the person who borrowed money for school a long time ago, didn’t finish paying off that loan, and then returned to school more recently.

In New Brunswick, the seven-year rule applies to different loans for different education periods separately. This means that if you have a student loan from a program that was from more than seven years ago and a completely different student loan from more recent studies, the older loan can be discharged in a bankruptcy or consumer proposal.

Student loans give access to education to people who may not be able to otherwise afford it. But taking a student loan is a special financial commitment and students should know what they are getting into, if not before they accept them, certainly before they start building a career to pay them back.

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of significant financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.

A Little Extra Time for Self-Employed People to File

admin — Thu, 17 May 2018 16:08:27 +0000

The April 30, 2022, personal tax deadline is approaching. However, for self-employed individuals (if you or your spouse or common-law partner carried on a business in 2021), the deadline to file for you and your spouse is June 15, 2022.

Even though the return is not due until June 15th, you are required to pay your income tax debt by April 30th. These dates also apply to filing your GST/HST return if you are an annual filer for GST/HST purposes.

“Contrary to popular belief, the interest you pay CANNOT be claimed as a deduction on the following year’s income tax return.”

If you have an amount owing (of more than $2) and cannot pay it in full by the deadline, you will be charged compound daily interest. The current interest rate is 6% (per annum) and changes quarterly. Generally, you can make arrangements for monthly payments as long as the debt is paid before the next income tax deadline. Contrary to popular belief, the interest you pay CANNOT be claimed as a deduction on the following year’s income tax return. The fact that the interest is not deductible can effectively double the rate as compared to deductible interest, depending on your tax bracket. 6% does not appear to be an unreasonable rate but, because it is not deductible makes it very expensive.

What happens if you’re late filing your return? Even if you cannot pay your full balance owing on or before April 30th, you can avoid the late-filing penalty by filing your return on time. Take note of the penalties:

If you owe tax for 2021 and you file your return for 2021 after the due date of June 15th, you will be charged a late-filing penalty. The penalty is 5% of your 2021 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
If you were charged a late-filing penalty on your return for 2018, 2019, or 2020 your late-filing penalty for 2021 could be 10% of your 2021 balance owing, plus 2% of your 2021 balance owing for each full month your return is late, to a maximum of 20 months.

Like interest on amounts owing, penalties are not deductible for tax purposes, so the penalty rates above are effectively doubled if you are in the highest tax bracket. The penalties are easily avoided by getting your return filed on time. You have five and a half months after December 31st to get the return done and filed. This really should be lots of time.

A large income tax debt (including penalties and interest) is one of the first signs of financial hardship to arise and shouldn’t be ignored. Besides the money stress, dealing with CRA and their collection calls and procedures can cause significant additional stress.

Avoid all the stress by putting filing dates and reminders on your calendar, budget for payments, and get returns filed and debts paid on time. Easier said than done? Not everyone likes carrots but most of us prefer to avoid “the stick”.

For more information direct from CRA:

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of significant financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.

Income Tax Deadlines Are Coming Soon But Why Do They Matter?

admin — Thu, 12 Apr 2018 16:05:21 +0000

For Canadians, April 30 is the official deadline to file your personal income tax return with the Canada Revenue Agency and once you have completed your return, you will either be entitled to a return refund or have an amount owing.

The deadline, if you or your spouse or common-law partner carried on a business in 2021 (other than a business whose expenditures are primarily in connection with a tax shelter), is June 15. However, if you have a balance owing for 2021, you have to pay it on or before April 30, 2022.

If you owe them

If you owe income taxes it must be paid on or before April 30 to avoid getting charged interest.

If you have an amount owing (of more than $2) and cannot pay it in full by the deadline, you will be charged compound daily interest. Generally, You can make arrangements for monthly payments as long as the debt is paid before the next income tax deadline. Contrary to popular belief, the interest you pay CAN NOT be claimed as a deduction on the following year’s income tax return.

What happens if you’re late?

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“Even if you cannot pay your full balance owing on or before April 30, 2022, you can avoid the late-filing penalty by filing your return on time.”

If you owe tax for 2021 and you file your return for 2021 after the due date, you we will be charged a late-filing penalty. The penalty is 5% of your 2021 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.

If you were charged a late-filing penalty on your return for 2018, 2019, or 2020 your late-filing penalty for 2021 could be 10% of your 2021 balance owing, plus 2% of your 2021 balance owing for each full month your return is late, to a maximum of 20 months. Yikes!

For more information direct from CRA:

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of significant financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.

Director Obligations and How To Prevent Corporate Debts From Becoming Personal

admin — Mon, 23 Oct 2017 16:47:00 +0000

Company debts can become personal debts. It is important to understand the links between the Company and directors (including guarantors of Company debts). These debts need to be considered and managed when dealing with a Company in an insolvency situation. We have the experience to help.

The most common director obligations are those imposed under the Federal Income Tax Act and Excise Tax Act.

Under the Income Tax Act, directors are personally liable for payroll source deductions that are withheld but not remitted to the Canada Revenue Agency (“CRA”).
Under the Excise Tax Act, directors are personally liable for net HST or GST that has been collected but not remitted to CRA.
Directors do not generally have personal liability for corporate income taxes owing by the Company.

Other Federal or Provincial acts can impose liability on directors, including liability for environmental damage related to company activities, unpaid wages, and vacation pay and workers’ compensation premiums.

It is possible to settle personal debts of a corporate director in a successful Proposal filed by the Company. The Bankruptcy and Insolvency Act only provides for the settlement of director liabilities that are imposed by Federal or Provincial legislation.

If the director has liability because the director signed a personal guarantee for a company debt, the Proposal will not generally discharge this obligation.

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.

7 Ways to Get More From Your Income Tax Refund

admin — Tue, 02 May 2017 07:00:20 +0000

The deadline for filing your 2021 personal income tax return will pass on May 1 and hopefully, you will be one of the people who is fortunate enough to be getting a refund.

While it may be tempting to spend your refund at the mall or splurge on some other consumer goods or a trip, we have 7 suggestions that will provide you with more bang for your buck.

Re-invest the money into an RRSP or TFSA. This will allow you to earn interest and help fund your retirement years. The contribution will also provide you with a deduction on the following year’s tax return.
Pay off/down high-interest credit cards/loans. The money you save on interest and payments can be used towards other debt.
Make a lump sum payment on your mortgage (if allowed). This could save you thousands in interest over the life of your mortgage and allow you to pay it off sooner.
Set the money aside in an emergency fund account that is not accessible online or through your bank card. This money can be used for expenses and avoids the use of your credit card which in turn saves you money on interest.
Put the funds into an RESP (registered education savings plan) or Canada Learning Bond to help fund your children’s education.
Make improvements to your house, such as replacing drafty windows or an inefficient furnace which will save you money in the long run.
Pay off your property taxes. If your bank does not automatically take out your property taxes as part of your mortgage payments then paying off your property taxes in full will save you on interest plus free up cash flow.

There are no doubt other ways to put your income tax refund to good use so we encourage you to think it through before spending the money. Remember, this is not money that you should be counting on so try to avoid the temptation to spend it all on things that may not have any lasting value.

Powell Associates Ltd. is a Licensed Insolvency Trustee (LIT) focused on providing debt settlement, proposal and bankruptcy solutions for individuals and businesses. We offer free consultations to review your personal financial situation and practical debt resolution options. Contact us to discuss your situation over the phone or book an appointment to meet us face-to-face in Saint John, Moncton, Fredericton, Charlottetown or Dartmouth – it’s your choice.

Income Tax Deadlines

admin — Tue, 25 Apr 2017 06:00:48 +0000

Income Tax Deadlines

For Canadians, April 30 is the official deadline to file your personal income tax return with the Canada Revenue Agency. Where April 30 falls on a Sunday, your return will be considered filed on time if it is received or postmarked on or before May 1, 2022. If you file your return past the deadline you will be assessed a late filing penalty. If you owe income taxes it must be paid on or before this date to avoid getting charged interest.

Note: if you are filing a return for a deceased person please refer to the following link – http://www.cra-arc.gc.ca/E/pub/tg/t4011/t4011-16e.pdf

Once you have completed your return, you will either be entitled to a return refund or have an amount owing.

Note: for tax payer relief provisions for individuals and businesses refer to the following link – http://www.cra-arc.gc.ca/gncy/cmplntsdspts/txpyrrlf-eng.html

A large income tax debt is one of the first signs of impending financial hardship and should not be ignored.

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.

What is a Deemed Trust?

admin — Tue, 31 Jan 2017 14:53:52 +0000

What is a Deemed Trust?

By simple definition, a “trust” constitutes property held by a third party (the trustee) for the benefit of another (the beneficiary).

A deemed trust is a trust created by statute or by legislation, whether you like it or not.

When an employer deducts income tax, CCP, and EI from its employees’ pay, those amounts are deemed to be held in trust for the Crown and remitted later.
Similarly, when a vendor collects GST/HST, they are deemed to be holding those amounts in trust for the Crown’s benefit.

The deemed trust attaches to the employer or vendor’s assets and must be paid to the Crown in priority to all other security interests.

Regardless of whether the funds have been segregated or commingled with the employer or vendor’s property, the deemed trust is a priority over all other security interests.

If you do not pay the payroll deductions or GST/HST amounts to Canada Revenue Agency (“CRA“) when they are due, CRA will assess your business for the amount owing and ask you to pay the full balance right away, including any penalties and interest that apply.

You should not use money held in trust for the Crown as a source of cash to run your business. Even if you keep these amounts with your personal or business funds, you should consider them to be held separate and apart.

In a bankruptcy, amounts owing for GST/HST and the employer portion of CPP and EI, and penalties and interest on these amounts are unsecured claims, ranking the same as all other general creditors of a debtor. However, before bankruptcy occurs, CRA may obtain a lien or charge (by filing a memorial judgment) against the real or personal property of a debtor. If CRA files a memorial judgement, it will be a secured creditor in bankruptcy for those debts.

Although income tax debt is not a deemed trust, if CRA files a memorial judgement for income tax debt, it will be a secured creditor in bankruptcy for that debt.

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.