Income Tax and Consumer Proposals

Income Tax and Consumer Proposals

Table of Contents

Tax Refund In Ontario

One of the significant advantages of a consumer proposal is that, unlike a bankruptcy, it is possible that you get to keep your tax refunds.  If you do not have any outstanding tax return filings and no previous tax debt, then CRA will continue to send you your tax refunds. In this article, we explore how your income tax is impacted by a Consumer Proposal.

CRA does have the right, though, to take your tax refunds for the tax years prior to your consumer proposal and offset it against the tax debt you owe for other tax years prior to your proposal filing. 

You remain eligible to receive your tax refund for the income earned during the year of the proposal after the proposal filing date. To avoid processing delays on the CRA end, it is recommended that for the year of the proposal filing you file two tax returns (Pre and Post).

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Filing of Personal Income Tax Returns In Ontario

It’s essential to file all of your outstanding income tax returns or have them ready to be filed before proceeding with a consumer proposal. CRA does not accept consumer proposals of individuals with unfiled income tax returns. 

It is advisable that for the year of the proposal you file two tax returns (called Pre and Post). One for the period from January 1 to the date of the proposal and the second from the date of your proposal to December 31. These returns will be due in the year following the year of the proposal and they should be paper-filed, not e-filed with CRA.

If at the time of filing the proposal you anticipate owing taxes for the period from January 1 to the date of your proposal, you may also need to prepare a draft of that tax return. You will have to provide a copy of that draft return to your proposal Administrator. You do not have to file it with CRA.

Whenever you are unsure as to what might be required in your specific case, you should always seek the advice of your Licensed Insolvency Trustee also known as your consumer proposal administrator.

The great news is that once your consumer proposal is accepted by the creditors and if your income or the value of your assets subsequently increases, you will continue to pay only what is required by your consumer proposal and not more. So from that angle, you should not be afraid to keep your tax returns up to date.

Income Tax Debt In Ontario

When you file a consumer proposal in Canada, taxes get treated as unsecured debt — that is, as long as you don’t have a lien issued against your property by the CRA prior to the filing of your consumer proposal.

It is important that you tell your Licensed Insolvency Trustee if you owe taxes so that proper advice could be given to you.

Income Tax After Filing a Consumer Proposal In Ontario

Good news! Your consumer proposal covered any taxes you owe up to the date you file the proposal. 

That said, any taxes due on your income earned after filing a consumer proposal cannot be included in the consumer proposal. These amounts are required to be paid in full and on time. You will also be required to continue to timely file all future tax returns as prescribed by the law. 

David Sklar & Associates Can Help

The licensed insolvency trustees at David Sklar & Associates are always ready to answer your questions and concerns about financial problems and guide you toward a practical solution. Call us at 1-844-962-9200.

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If you are overwhelmed by debt, call us at 1-844-962-9200 to book a FREE, confidential appointment. We will review your financial situation in detail and discuss all of your options with you. Alternatively, you can fill out the form below and our team will reach out to you. 

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Jerry was professional and was easy to deal with
Debbie Asquith
00:09 29 Nov 22
I was quite nervous and a little embarrassed that I needed financial advice. I met with Jerry Janiec and he was very helpful. He made me feel comfortable and explained everything in easy to understand terms so that I understood what my options were. I would recommend David Sklar & Associates for anyone in my position.
Melissa Blackburn
19:53 17 Nov 22
I was fortunate enough to be referred to David Sklar & Associates Inc. by a family member. Now in the10th month of a Consumer Proposal process, I am very impressed with the organization, professionalism and impeccable customer representation that I have experienced. To this effect, I amparticularly thankful to Jerry Janiec and Rhoda Lewis for their excellent work.
Suzanna Vaclavik
12:21 16 Nov 22
Recently dealt with Christine at David Sklar & Assoc. and worked out a Consumer Proposal to put forth to my creditors for my Credit Card debt. She was very courteous, professional and put me at ease with a proposal that I can afford on a monthly basis, which will eliminate my debit in a reasonable timeframe. I would recommend Christine and this firm in a heartbeat. Very happy with the service and attention I got !!
Patrick Kovanchak
01:59 15 Nov 22
Excellent customer service. Special thanks to Olga for being prompt and helpful. She’s a star. Bibi is helpful as well. Great agency to work with.
Fady Tadros
19:28 14 Nov 22
After seeing your commercial play on CP24, I realized that it addressed all the questions and concerns I had about my financial situation. It all started with my one phone call to your office. I had the extreme pleasure of working with Cori Naron at your St. Clair West office in September 2022. She took the time to explain what my options were knowing that it was a very stressful situation with my debt load. She made me feel at ease with my decision to file a consumer proposal and outlined the benefits to me. She is thorough and her attention to detail is outstanding. While it takes a little while to reap the benefits of making this hard decision, she took the time to reassure me that it was in my best financial interest. Well done David Sklar & Associates for having such an amazing representative at your company and for allowing me to "get a fresh start"!
David
14:31 14 Nov 22
Very highly perfection individual, well executed and greatly knowledgeable in his work, which guided me me the right decisions making opportunities. Thank you.Sincerely, Peter Romasz
Peter Romasz
20:18 13 Nov 22
Trina Powell was very helpful and made the process very easy. Thanks again for all your help.
Jennifer Hager
17:59 06 Nov 22
Jerry is a caring, trustful, knowledgeable and competent Sklar associate. He understood my needs and quickly went to work on my behalf. Ever indebted to David Sklar and Associates and especially to Jerry for his professionalism and caring approach.
David Craig
19:31 31 Oct 22
Jerry Janiec is very knowledgeable and very helpful everything he explained to me was straightforward and very easy to understand. I'm very pleased to be working with Jerry to become debt free. I will definitely be recommending to any friends or colleagues your services.Thank you again for helping me get on the road to be debt free. 5 Stars is well deserved.
Christopher Rakobowchuk
17:41 27 Oct 22
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