CRA Garnishment Rules and What They Can Mean for You
A CRA wage garnishment can be very difficult to live with. It is vital to understand CRA garnishment rules and what you can do if the CRA is threatening a garnishment. Under those rules, They can garnish up to 50% of your earnings along with other income. Call Farber Tax if you need help fighting a wage garnishment.
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How CRA Garnishment Rules Could Affect You
The Canada Revenue Agency (CRA) has very strong collection powers that it uses when taxpayers do not pay their tax debts. One of these measures is a wage garnishment. This is an incredibly strong power and one that can be very difficult to deal with. CRA garnishment rules state that the agency can direct your wages to them without a court order and without even a warning if you owe tax debt and have not paid it.
Obviously, no one wants this to happen to them. To understand how to avoid this situation, and what you can do if it happens to you, it’s important to understand CRA collection processes and the CRA garnishment rules.
How Much Do CRA Garnishment Rules Allow the Agency to Collect?
One of the most common questions is “How much can the CRA garnish?” The answer depends on the how you earn your income.
- If you are an employee and have taxes deducted at the source, the CRA can garnish up to 50% of your earnings
- Subcontractor income be garnished up to 100%
- If an individual is self-employed, the CRA can send notice to their business clients and order them to redirect their payments the agency. The CRA can garnish up to 100% of the invoices.
Not only can it become extremely difficult to afford monthly expenses, purchase food, and live life if you are not receiving all your income, but a garnishment can also be damaging to your reputation. If you operate a business or do freelance or contract work, CRA garnishment rules allow the agency to contact your clients and require them to send 100% of the money to the CRA instead of you. This lets your clients know that you are having tax issues, which could cause them to reconsider their business relationship with you. In addition, if you work in a field where you are required to manage money or financial details, and your employer or client is required to garnish your wages to the CRA, this could harm your reputation.
Dealing with CRA Garnishment
If you have had your wages garnished by the CRA, or if the agency has threatened to garnish your wages, the quickest way to resolve this situation is to pay the debt owed to the CRA. Of course, this may not always be possible, especially if your debt is very large and/or if you are paying large amounts in penalties and monthly interest.
The next option is to arrange a payment plan with the CRA. However, the agency is notoriously very difficult to negotiate with. Not only are CRA terms and processes incredibly detailed and confusing, but the CRA knows that it can use its strong powers to enforce compliance. CRA garnishment rules allow the agency to get its money one way or another, so it often isn’t willing to negotiate.
Even if you are able to negotiate a plan, note that the CRA will not accept less than is owed to it. In rare cases of extreme hardship or circumstances beyond control, the CRA will reduce or eliminate interest charges and penalties. However, you will still owe the full amount of tax. However, if negotiated correctly, the payment plan will make it possible for you to afford to repay your debt and keep the CRA from seizing your income or assets.
Working with the team at Farber Tax Solutions can help. Our team of ex-CRA professionals, working in affiliation with tax lawyers from Farber Tax Law, know what it takes to effectively communicate with the CRA and arrange a payment plan that works for you. If your wages have already been garnished, we can speak with the CRA on your behalf and work to have the garnishment lifted. Our knowledge of CRA garnishment rules and tax law allow us to develop a strategic plan to resolve your tax situation, remove garnishments, and help you enter a long-term payment arrangement.
Farber Tax Solutions can help you successfully deal with CRA problems. We utilize the experience of our tax experts to:
- 1| Offer a comprehensive solution that is focused on achieving the most favourable possible outcome for your tax issue;
- 2| Communicate with the CRA on your behalf and navigate the entire CRA dispute process; and
- 3| Offer a complete solution to your tax problems, including ex-CRA professionals and tax lawyers from Farber Tax Law.