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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The team at David Sklar and Associates Inc are very professional and are willing to help you get out of debt. Highly recommended.
Melissa MacKenzie
12:35 29 Mar 23
I would like to thank the team at David Sklar and associates inc. for all the time and effort they put in to support this process for me. This topic can be challenging to disclose but a big thank you to Christine for going above and beyond in guiding me through all my options and supporting me through the decisions. I cannot recommend this group enough , as they have shown me compassion , knowledge , and understanding throughout the entire process. I look forward to the next step of this process and learning how the proper way of becoming financially educated through the support of their financial counselling team. For anyone who is struggling , just know that there is a wonderful group of educated professionals at David Sklar who are available to help!
Michelle Plouffe
18:45 14 Mar 23
It took me awhile to get up the courage to contact David Sklar but I’m so glad I did. Trina walked through my options with me and provided the knowledge I needed to make a decision to help turn my financial situation around. She is patient and empathetic and answered any and every question that I had. Trina provided me the reassurance I needed that I was making the best decisions for me and my family. I’m so happy that I reached out and now have a plan to get back on track.
M. Mackenzie
19:59 12 Mar 23
Trina was very helpful and thorough.
Sam M
15:26 12 Mar 23
Christine was very helpful, kind, and understanding. She explained everything thoroughly, answered any questions I had, and was responsive to any concerns I had. 100% would recommend
Katherine Campbell
17:29 08 Mar 23
Jackie Stanley is excellent she took the time to explain everything to me and I am so grateful to her for giving me a fresh financial start so if you have any doubts don’t and go see her if you want to achieve financial freedom!
Heather Helfield
21:24 06 Mar 23
Amazing friendly staff that knows what they are going. They make a difficult situation not so bad. Would give 10 stars if I could.
alie Balan
22:37 25 Feb 23
Very helpful and kind and gave me all the available options before helping me decide which one was best for me. I would definitely recommend Jackie
Alison Rivard
01:01 21 Feb 23
Great experience i was in financial trouble and someone of my friends recommended this company. Cori is a wonderful and welcoming person she did a very good job and came up with a smooth and flexible monthly payment after the reduction. i highly recommend this company. Thank you David sklar and special thanks to Cori.❤️🙏🏻
Jasmine Joseph
22:08 13 Jan 23
Met up with Mr. Jason Sklar to discuss more in person, very thorough and clear. He is very kind and thoughtful, I will be referring anyone with the same situation to David Sklar & Associates.
Ariel Domingo
02:33 29 Dec 22
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