Understand How Taxes Work In A Consumer Proposal

Personal income tax

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. It will be entirely up to you to use the money where you need it most and you may also use it to prepay your 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 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).

Let’s Talk

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.

Let’s Talk

Take Your First Step Towards A Debt Free Life

If you are overwhelmed by debt and live in the Toronto area, call us at 416-498-9200 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. 

Share This!

Share on facebook
Share on twitter
Share on linkedin
Share on reddit
Share on pinterest

Ready to live debt free?

Jerry is a very patient person, he answered all my questions and made this experience so smooth and easy for me. I was not sure what to expect but dealing with him made me feel so much better. He sure knows what he is doing and how to put people at ease for sure (should have done this long ago). I recommend him to anyone I am so glad I had him on my side and now to do my part. Thanks Jerry ur greatPattie
Patty Murphy
21:34 18 May 22
Rhoda Lewis helped me achieve a fresh start two and half years ago! She was very professional with a very warm, caring personality! I emailed her today with a question and she responded quickly. She's great at her chosen profession!!
Debbie Livingston
01:24 11 May 22
Nothing but good things to say about Jackie. She was so nice and so understand and everything was so quick and easy. In a matter of a week, there was the solution that I never thought was possible. Thank you so very much for everything that you have done. ❤️❤️❤️
Cassandra Keenan
21:05 10 May 22
I was in a lot of debt and stress, Jackie Stanley with David Sklar & Associates was very professional, and extremely helpful with getting out of debt. I should of did this sooner, they take the all the weight and stress of a persons shoulders, amazing team at David Sklar & Associates!!
Hubert Z
03:08 10 May 22
Jackie helped me out during a really tough time and she made the entire process very easy and painless. I highly recommend reaching out to her if you find yourself in any financial trouble. You won’t be disappointed!
prettylush 13
02:42 10 May 22
I had a good experience with Jackie. Making appointment to see her was easy and follow up was great. I appreciated the detailed information she gave and the clear explanation of the options I had. While I landed on this company without anyone's recommendation, I will be happy to recommend their services to those who need them.
Kipyego arap Serem
19:00 09 May 22
Jackie has been really helpful with my issues. She is approachable and friendly and I recommend her to anyone trying to access her services.
Ankita Sisodia
18:51 09 May 22
The service that was provided to me from Trina at David Sklar and Associates was nothing but superb! I was referred to them through family, and Trina was nothing but understanding and so so so helpful! Every part of the process was smooth and efficient and she explained everything to me so I would be able to understand the process. Can’t believe the weight that has been lifted off my shoulders. Thank you so so much Trina!
Christina Ivany
15:52 07 May 22
I’m so glad that I spoke to Rhoda. I was nervous having to claim bankruptcy, but Rhoda is very resourceful and has a wonderful way of putting you at ease. I felt like I was speaking to my best friend. Rhoda from the bottom of my heart thank you for your help and kindness it goes along way. Linda Bennett
Linda Bennett
15:29 06 May 22
I was absolutely terrified of admitting I needed help and was in a tough position where my best option was to file for bankruptcy. As someone with severe anxiety it was one of the hardest calls I had to make but once I spoke with Trina at David Sklar she immediately made me feel at ease and like I was in good hands. I mostly dealt with Trina and Eva who were so kind and communicative throughout the whole process and made it as painless as possible.I did briefly speak with a couple of other associates from time to time and they were also equally as lovely. The reviews for this company obviously say a lot about these guys and it rings true. I’m not someone who usually writes lengthy reviews but I am happy to recommend David Sklar and associates for anything. Thank you guys for always treating your clients like human beings and always being available for questions or concerns.
Emma Higgins
19:14 02 May 22
js_loader