Tax season brings help for Manitobans

Helping low-income Manitobans prepare their tax returns reaps big rewards

The cost of income tax preparation is significant for some low-income Manitobans, but the cost of not doing their taxes can be even more significant in lost benefits and credits.

Enter Community Financial Counselling Services (CFCS) – a United Way agency partner that offers financial counselling, education and advocacy for people; especially high-risk populations facing financial challenges.

Since 2008 CFSC has worked in partnership with Canada Revenue Agency (CRA) to provide free income tax preparation to 10,000 Manitobans annually through the Community Volunteer Income Tax Program (CVITP).

CFCS Executive Director John Silver expressed appreciation last April to volunteers who worked preparing taxes for low-income Manitobans.

CFCS Executive Director John Silver expressed appreciation last April to volunteers who worked preparing taxes for low-income Manitobans.

“Many people can’t afford the $60 to get it done,” said John Silver, CFCS Executive Director, at their volunteer appreciation lunch last April.

John points out that people need to complete their tax return to be eligible for benefits and tax credits related to things like GST, pharmacare, disability and child care.

“It’s the same money that all of us are entitled to when we do our taxes.”

The work they do returns $20 million Winnipeggers are entitled to, John says, representing a 400-fold return on the $50,000 program cost.

The value of the service is also apparent to the CRA-registered volunteers who prepare taxes for clients.

Volunteers enjoy an appreciation lunch last April. Many will be ready to help again this February!

Volunteers enjoy an appreciation lunch last April. Many will be ready to help again this February!

“It’s written all over their faces,” said Hugo Peters, who has volunteered for over 10 years.

“People who struggle or make do with very little, they have no pretense.”

The tax preparation program is available free to all Manitobans with low income earnings. It opens at the Norquay Building on February 21st and runs 9AM to 3PM Tuesday to Friday until April 28th.

This is just one resource available to Manitobans. To find a service closest to your home, visit mb.211.ca and click on the tile for financial services.

To learn more about the CVITP specifically, or to volunteer in the program preparing taxes for low-income Manitobans, go online or call 204-989-1900.

Frances Kusner, who turned 100 last April, volunteered with CVITP for 41 years. She retired this year. Thank you, Frances!

Frances Kusner, who turned 100 last April, volunteered with CVITP for 41 years. She retired this year. Thank you, Frances!

Razor’s edge.

Winnipeg Free Press, Saturday April 9, 2011. Reproduced with permission.
By: Joel Schlesinger 

Single mother needs plan to escape mountain of debt

Razor's edge: single mother needs help to escape a mountain of debt.

Image courtesy of the Winnipeg Free Press.

Valerie is a single mother who has been robbing Peter to pay Paul to keep on top of her many debts.

A recent university graduate, the 36-year-old provincial government employee owes more than $20,000 on eight credit cards, which are all over or near their limits.

On top of that, she owes about $38,000 on a line of credit.

“The credit line paid off my student loan, and the credit cards are pretty much what I lived on for four years while going to school and raising a child.”

Earning about $46,000 annually before deductions, as well as receiving child support, Valerie says she is often juggling debt payments, using one source of credit to cover the minimum on another to keep afloat.

She also owns a home on which she owes about $218,000. Assessed at $250,000, she fought to have its value lowered from $275,000 to reduce her property taxes.

Valerie has no savings for emergencies and says she is one missed paycheque from financial disaster.

“I can’t declare a second bankruptcy,” she says, adding she declared bankruptcy when she was married.

Ironically, her parents are well-off and have contributed substantially to her 10-year-old child’s RESP, but Valerie is reluctant to ask for help.

“They’re supportive in that they’ll always be there for me and my son, but I was also raised (to believe) you make your own mistakes, so you get out of them yourself,” she says.

“I know I can get through this. I just need a plan.”

Dawn Masters is a debt counsellor at Community Financial Counselling Services in Winnipeg, a not-for-profit, United Way-funded organization.

She says Valerie’s first step is to compare her monthly cost of living against her monthly net income. Cost-of-living expenses include mortgage payments, groceries, utilities and other necessities, but exclude payments on debts, such as interest costs.

“Currently, her net income, which includes pay, child maintenance and tax benefits, is $3,267,” Masters says. “And her total monthly expenses are $3,129, which basically leaves her with a very small surplus of $138.”

That amount isn’t even enough to cover the interest charges of $165 a month on her line of credit.

And it gets worse. Overall, her minimum payments on all her debts are close to $1,100 a month.

“The cost-of-living amount is really important because she has to have enough left to pay for her debts, and if she doesn’t have it in her cost of living, she’s going to continue to fall behind.”

The good news is Valerie can still get herself out of this financial bind without declaring bankruptcy, Masters says.

The solution is easy to understand, yet difficult to execute: She needs to increase her monthly surplus to pay down her debt.

“One way to do that is to increase her income,” Masters says. “The problem there is Valerie works full-time and has a 10-year-old son, so she doesn’t have a whole lot of time for a part-time job.”

She can also ask for a raise, but that might be a long shot, too.

Another strategy is to examine her expenses and try to trim costs. Valerie is already on a lean budget, so this will be difficult.

“She needs to take a look at it in any case,” Masters says. “Once amounts are verified, then she can make a decision about whether or not she wants to spend her money in specific areas.”

Valerie should also look into how much tax is deducted at source when she gets paid by her employer. She likely gets a sizable tax refund every year from a variety of tax credits and she may be able to realize some tax savings immediately on each paycheque.

“It will mean she will not get as significant a refund when she does her taxes, but it would increase her cash flow on a monthly basis.”

At the same time, Valerie can try a few strategies to reduce her debt costs.

“Several of her credit cards are over limit,” Masters says. Generally, credit card companies charge a $25 monthly fee as a penalty for over-limit accounts. She could be paying as much as $200 a month in fees for being a total of $600 over on all her cards. And those fees are added to the balances, accumulating more fees and interest.

With about $7,000 of room left on her line of credit, she should transfer the $600 to get rid of those fees right away.

Valerie should also ask her bank to increase her credit-line limit so she could move all her credit card debt, with interest charges as high as 28.99 per cent, to the credit line, which bears a 5.5 per cent rate.

Masters says Valerie doesn’t have any equity left in her home at this point, based on the assessed value. But financial institutions typically lend on lines of credit up to 75 per cent of a home’s market value, which tends to be higher than the city assessment. In her case, the home’s value may be considerably higher since she had its assessment lowered by $25,000 for property tax reasons.

Furthermore, Valerie could try to renegotiate the mortgage to extend the amortization and consolidate debt, creating one easy payment that may not be much higher than her current mortgage payment.

Yet Valerie’s best chance at getting out of debt may be the one she is very reluctant to consider — asking for her parents’ help. They could pay her debts and she would pay them back at a lower cost than she could find at any financial institution.

“They can do a formal agreement stating that she pledges to pay ‘X’ number of dollars a month, but with no interest or minimal interest,” Masters says.

In the end, it may be that Valerie will use a combination of all these strategies to get herself in a cash-flow position where she can cover both living expenses and debts. But regardless of how she does it, Masters says Valerie should at least do one thing to make sure she stays on track: Cut up all but one of her credit cards and leave the one card at home for emergencies only.

“We always caution people that once the cards get paid off, there’s a tendency for people to think they don’t owe anything and they slip back into using the cards.”

Collection calling.

Winnipeg Free Press, Sunday December 26, 2010. Reproduced with permission.
By: Joel Schlesinger 

Better to call creditors than other way around.

Ouch! That pain in the midsection could be the result of a well-fed tummy seeking to expand its borders in an increasingly restrictive pair of slacks. Or, it could be your wallet, battered and bruised from more than a month of intense use.

Either way, a change in diet could be required. But for those with financial indigestion, it could be that the gorging has gone too far. Recent Statistics Canada figures show Canadians are among the world’s freest of spenders. While our neighbours to the south have been forced to belt-tighten in recent years, we have continued to burn through cash. Third-quarter data for 2010 show for every dollar a Canadian household earns, it owes $1.48 — a record high and also higher than in the United States.

Many Canadians can manage this, but what about those who can’t? Instead of the ring of the cash register, the only ring they hear is the phone. The creditors are calling and they want their money back.

But it’s not just overspending that gets people into this situation, says John Silver, executive director of Community Financial Counselling Services (CFCS), a United Way-funded charity that helps Manitobans manage their debts.

It’s people who have lost their jobs, had their work hours cut back or have fallen ill.

“A lot of people live from paycheque to paycheque and if you become disabled, the major breadwinner in the family falls ill and becomes disabled either permanently or even temporarily, even if you have insurance, your income goes down by at least a third,” says Silver.

And making up for a third less cash flow can be a tall order for families with only a couple of hundred additional dollars to spare every month.

If the finances should reach a breaking point, Silver says the best course of action is to be up front with creditors about the problem.

“If you can demonstrate to creditors that you’ve been hospitalized and not earning any money, some of them will have an understanding if you contact them directly.”

In other cases, in which the problem arose from overspending alone, they may be less sympathetic, but Silver says it’s still worth a try to get them to reduce the interest rate or payment.

“It’s best to start in writing and then to follow up with a telephone call,” he says. Often finding the right person to contact can be difficult. Silver says it’s like a maze, and if people find it too baffling, they can always contact agencies like CFCS for help.

“It’s better if the individuals can do it, but we will help provide you with the form letter and indicate the best way to contact the creditor.”

Usually, the best-case scenario is the creditor may forgo payments for a month or two and reduce the overall interest rate. While they may not even do that, it’s still worth trying rather than doing nothing and proceeding to the next plane of financial hell: calls from creditors.

Fortunately (or unfortunately for creditors), Manitoba has some of the strictest regulations for collection agencies in the country.

These include restricting phone calls to between 7 a.m. and 9 p.m. (Yes, some used to call in the middle of the night.) But they can call you at work.

“A common misconception is that they cannot call your employer,” says Jan Forster, director of the Manitoba government’s Consumer Protection Office.

But creditors cannot call your friends, neighbours and family to determine your whereabouts or find out any other personal information.

“They can send you letters and threaten to take you to court,” Silver says.

“They can report you to credit bureaus, and if it’s a secured debt, by whatever — a house or car — they can seize the property, and they can garnishee your wages, but they have to go to court to do that.”

Creditors have to take the proper legal avenues to seize your assets and encourage you to pay up. The bottom line is they can’t harass you.

And if you feel you’re being exposed to undue pressure, Forster says to contact the Consumer Protection Office, and they will investigate.

“Really collection agencies are bound by fairly strict parameters by what they can and can’t do,” she says. “It’s always good to call us if you want to double-check what you’re experiencing is legal and OK.”

Yet unless consumers are being harassed by creditors or were misled when entering into the agreement in the first place, they have little legal recourse, says Allan Fineblit, CEO of the Law Society of Manitoba, a self-regulating body for the province’s lawyers.

Fineblit says a lawyer’s services are limited when helping people deal with debt issues.

“Lawyers will explain some of the options available to people, the most extreme being bankruptcy, but there are less drastic options,” he says. “Sometimes, for example, lawyers will negotiate with creditors or put together a proposal for creditors.”

But most people are often better off seeking help from agencies like CFCS that provide services free of charge.

In rare cases, Fineblit says, individuals may have a legal leg to stand on if they believe the debt was incurred for goods or services that were unsatisfactory.

“Or they were promised something that they didn’t receive, or there were some kind of issues with the payment arrangements that weren’t properly explained to the person.”

Still, seeking legal help is a last resort after all other avenues have failed.

But those who do feel they need a lawyer can contact the Lawyer Referral Service, which will provide about a half-hour of free legal advice and refer those who need one on to a suitable lawyer.

Yet, for most individuals who find themselves in debt trouble solely because of their own actions, and a little or a lot of bad luck, they have few options other than to repay the debts in full or at least partially.

And the sooner they address the issue the better off they’ll be.

“It’s better not to try to avoid the problem, but many people do,” Silver says. That only makes the problem worse. The more creditors are ignored the harder they try, he says.

“And then your debt gets sold — and they get sold a lot — and the further down the line, the more pressure that gets applied.”

How do Canadians match up debt-wise?

A recent study by Certified General Accountants Association of Canada found Canadians carried the most credit card — or consumer debt — of any of the OECD (Organization for Economic Co-operation and Development) members. On average, Canadians’ consumer debt is about 10 per cent of the value of their total financial assets. In the United States, the number is closer to seven per cent.

Numbers to call

Community Financial Counselling Services This non-profit agency provides free financial advice for individuals with financial difficulties. 989-1900.

Consumer Protection Office of Manitoba The government watchdog that regulates collection agencies in Manitoba. 945-3800.

Lawyer Referral Service Funded by the Law Society of Manitoba and the Manitoba Law Foundation, the service provides general, free legal information over the phone and can refer callers to appropriate legal resources. 943-2305.

Recently had your finances laid low by illness or disability?

There will soon be some great resources available, thanks to a grant awarded to the Community Financial Counselling Agency. Social and Enterprise Development Innovations awarded the TD Financial Literacy Grant to CFCS, who has partnered with the Manitoba League of People with Disabilities to develop financial literacy resources and information for people with disabilities over a period of two years.

“There’s lots of financial literacy stuff out there, but not specifically that deals with people who are disabled,” says John Silver of CFCS about the reason for the project. And while many financial aid programs exist to help people with disabilities, they can be difficult to access.

Silver says this project will aim to bring all the information together in an understandable, accessible way.