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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I worked primarily with Christine, who was very friendly and outgoing. She was quick to help me, and explained everything I needed to know very well. She's quick to answer any questions I may have as well. The other members I spoke with were also very kind and jovial, and were happy to help me with anything they could. They made sure my proposal fit within my budget, and got everything going very quickly. I was happy to work with them, and would highly recommend their very friendly service!
Melissa McAllister
Very processional and understanding of my situation. Thanks to all your team.
Luc Valade
Jennifer Norton's exceptional assistance with my consumer proposal was life-changing. Her professionalism, expertise, and dedication were evident from the start. Jennifer's thorough explanations and attention to detail created a tailored proposal that set a clear path to financial freedom. She went above and beyond, advocating for my best interests and providing invaluable support. Thanks to Jennifer, I'm on track to a stress-free financial future. I wholeheartedly recommend her – she's not just a financial expert; she's a life-changer. Thank you, Jennifer!
They made a difficult situation, easy thank you.
Ray Barkley
I had a great experience with Christine from David Sklar & associates. Very professional, and easy to get through. Thank you
fukinwith doug
Great customer service and a smooth process to get your finances on track. Informative and thorough.
Adrian Downey
From the moment I sat down in the office, I felt welcome and at ease. Grace Cuffaro was both friendly and highly informative. She is extremely knowledgeable and answered all of my questions in detail, making sure I understood before moving on. I was reassured throughout the process that I was making the right decision and that it was not uncommon nor anything to be ashamed of. I didn't expect my appointments to be such positive experiences, but that's exactly what they've been!
P Bains
I was in a tough financial position and found myself searching for relief. I came across David Sklar & Associates page when doing my research on financial advice. The reviews were amazing, but I was concern because I didn’t know what to expect. I made the decision to set up a consultation and had the pleasure to meet with Jennifer Norton. Right from the beginning, she was attentive, knowledgeable, and pleasant to meet with. The experience was painless and very educational. Jennifer made sure I understood my choices, answered my questions, and concerns promptly, in person, over the phone and via email. I’ve been working with Jennifer for a couple months now and I am pleased that Jennifer is the manager handling my file. I would and have recommend Jennifer Norton, David Sklar & Associates to anyone in need of direction regarding finances.
A.L Thompson-Lawrence
I had my first meeting with Jennifer, she was really understanding and extremely helpful, and got everything done in a timely manner.
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Jennifer Norton has been the most helpful throughout this truly embarrassing situation that I find myself in. She is informative, understanding, and there is absolutely no judgment. She has handled everything in a very professional and respectful manner and I am SO glad that I have them on my side. Definitely a huge weight off my shoulders.
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