Owning a corporation and revenue canada

[Cassini]

Not paying Revenue Canada is a major mistake.

Having said that, your options are:

1. Declaring bankruptcy / dissolving the corporation. The corporation is bankrupt, you owe Revenue Canada more money than you have in cash on hand.

2. Open a new corporation for day to day business. It would be a good idea if you were not a director of the new corporation, because of 3. Structure the new corporation as a sale of the assets of the old corporation to the old company. Revenue Canada will get the proceeds, talk to your lawyer to structure the sale appropriately. Certain rules must be followed.

3. Expect to pay Revenue Canada a large fraction of your net worth, and if you are lucky, they will write off the remainder of the debt. You may need to take a mortgage out on the house, even if it is in the wife's name. Note that even if technically you don't need to take a loan out against the house, it may be cheaper to take out the loan than it is to pay the legal fees.

You made a big mistake! Expect painful consequences.

4. Next corporation: Place payroll tax money and GST/HST money in a separate bank account that is not used for day to day business activity.

 

[rhuarc29]

4. Next corporation: Place payroll tax money and GST/HST money in a separate bank account that is not used for day to day business activity.[/B]

Normally I wouldn't suggest this, as it could unnecessarily hurt the company finanically, but in the OP's case it might be necessary seeing as he's already failed to act appropriately and in a timely fashion.

 

[pilen13]

I am not a director of the corp, just a signing officer. Would all the debt be my issue as well or only the directors

 

[GPIDEAL]

I may be wrong but I've heard of something called directors liability. I think they can come after personal assets if the debt involves trust funds (payroll deductions/GST/HST).

Absolutley!

 

[GPIDEAL]

I am not a director of the corp, just a signing officer. Would all the debt be my issue as well or only the directors

When you collect HST, you are holding it in trust for the government to remit it (less input tax credits incurred). When you withhold payroll source deductions, you are holding those funds in trust for CRA/Receiver General also.

If I was a director, I'd give you shit (if not fire you, depending on the severity of the arrears) for not doing your job to ensure that such monies are not maintained and withheld.

Most accountants will recommend that you have a separate payroll account so that after the payroll is prepared, you transfer enough to pay it plus the source deductions. This way you don't mix such trust funds with other operational monies. (so what you don't have in your general account, you don't pay out to others that must wait, like your suppliers who don't have the super power of collection that the government has).

You should meet with CRA and make a payment arrangement. Obviously, there's a hold since the garnishment they've demanded against your bank account is in excess of available funds, otherwise there wouldn't be a hold if there were sufficient funds to cover that plus more.

 

[GPIDEAL]

Normally I wouldn't suggest this, as it could unnecessarily hurt the company finanically, but in the OP's case it might be necessary seeing as he's already failed to act appropriately and in a timely fashion.

How can this hurt the company financially? Many corporations have two if not three separate bank accounts: Payroll, General, Trust, Money Market or what have you.

 

[pilen13]

Ive gone to speak to the RC officer, he basically said go borrow the monies.
I have proposed a payment plan and it was revoked

 

[Rockslinger]

Many corporations have two if not three separate bank accounts: Payroll, General, Trust, Money Market or what have you.

Our company also has a USD account. If I remember correctly we collected the old GST in USD on our USD sales and we remit to Ottawa in USD's as well. No need to convert to CAD's. Haven't done in in over 5 years so my memory could be wrong and/or they could have changed the rules.

 

[GPIDEAL]

Our company also has a USD account. If I remember correctly we collected the old GST in USD on our USD sales and we remit to Ottawa in USD's as well. No need to convert to CAD's. Haven't done in in over 5 years so my memory could be wrong and/or they could have changed the rules.

Oh I forgot the USD account, thank you. That too!

 

[GPIDEAL]

Ive gone to speak to the RC officer, he basically said go borrow the monies.
I have proposed a payment plan and it was revoked

He's saying that because the minute he releases the garnishment, he's afraid you won't pay him and fuck off. He needs his leverage. He's not interested in security either. He wants you to finance the payback yourself.

You in fact borrowed from the Receiver General for Canada when you applied those trust HST and ETD accounts against your other expenses. Now they want their money.

Don't you know that the CRA has more power than the mafia?

What I would do is speak to your bank about borrowing to pay this off. Can you still deposit funds in the account to lower or wipe off the arrears? When will those deposits be received?

If you have to pay your employees, then maybe start a different account for a short/temporary time to pay them. But you better pay off the tax arrears as soon as possible.

P.S. I'm assuming that the source deduction arrears are correct and that the net HST owing is also correct.

 

[underice]

Also use a payroll service in the future.They will collect and remit taxes.You will always be current and your employess will have direct deposit.

Rev canada is usually ok just as long as your always kicking some their way.Even if you are in arrears.I'd bet if you came up with 25 % of what you owe and make a plan with post dated ck's they will get off your case.

 

[pilen13]

He's my thoughts:
Why should the vendors suffer. I know this isn't a wise decision however, paying Rc would cause our vendors to suffer.
I want to make a proposal that keeps both Rc and vendors accomodating.
Secondly, what if i don't have 25% to give them? Being in the construction industry, its a rollercoaster cycle. Some months theres surplus and other months your in the red.
Rc is entitled to there money, however, just as a contractor dones, they need to finance corporations at times. With the obscene interest they charge it makes it harder to pay them.

 

[GPIDEAL]

He's my thoughts:
Why should the vendors suffer. I know this isn't a wise decision however, paying Rc would cause our vendors to suffer.
I want to make a proposal that keeps both Rc and vendors accomodating.
Secondly, what if i don't have 25% to give them? Being in the construction industry, its a rollercoaster cycle. Some months theres surplus and other months your in the red.
Rc is entitled to there money, however, just as a contractor dones, they need to finance corporations at times. With the obscene interest they charge it makes it harder to pay them.

I hear ya. I'm very familiar with that industry

But unfortunately, it's not an excuse. It's easier to delay payment to your non-government suppliers and service providers. The penalties and interest charged by the government are way too onerous, and their collection powers are enormous.

You need to do more cash flow projections for those roller coaster rides, and plan to meet those challenges with your LOC or other short term borrowing, coupled with supplier payment deferrals.

 

[guelph]

There is no doubt more to this story. CRA does not simply shut-down accounts without notice. This guy likely ignored lots of letters, missed payments and tried to stretch as far as he could with CRA.

That has been my experience you mess with them and they can be nasty. I had a client that had to learn this the hard way. Then made arrangements to pay and no problem even when he had a cashflow problem simply called them and explained issue and was given additional time - since he had established a track record of regular payments

 

[guelph]

Ive gone to speak to the RC officer, he basically said go borrow the monies.
I have proposed a payment plan and it was revoked

This seems unusual did you talk to collections? I have had several clients and we arranged a payment schedule usually amount must be repaid by the end of the taxation year.

 

[pilen13]

It is a very stressful situation that fuuuuks u up physically, mentally and emotionally. I hope they will compromise with me and we can move on. This is a lesson i will never forget.

 

[GPIDEAL]

It is a very stressful situation that fuuuuks u up physically, mentally and emotionally. I hope they will compromise with me and we can move on. This is a lesson i will never forget.

Don't stress. You're not the only one. I've had to deal with arbitrary assessments and account holds myself. You know when you are on borrowed time.

 

[pilen13]

They are pieces of shit. They have declined my payment proposal. One last call to the team leader on Monday, if that doesnt work if screwed. I worked out to a 25% payback over 6 months.
Now what do i do?

 

[GPIDEAL]

They are pieces of shit. They have declined my payment proposal. One last call to the team leader on Monday, if that doesnt work if screwed. I worked out to a 25% payback over 6 months.
Now what do i do?

Can you sell your payment proposal to a 3rd party financier instead?

 

[friedrice]

NO NO NO NO!!!

Do not call the Dio Guradi crooks. They're even bigger criminals!

I went to see them some years ago and when I asked them for a receipt, the clown takes a blank, white sheet of paper and handwrites "Receipt for $400". No logo, no nothing. I looked at him like "you're fucking kidding me, right?"