Filing taxes while in a consumer proposal or bankruptcy can be a confusing and stressful experience. However, it is important to understand that you are still required to file your taxes, even if you are in the process of resolving debt issues. In this article, we will discuss the process of filing taxes while in a consumer proposal or bankruptcy, and how a licensed insolvency trustee can help.
Income Taxes in a Consumer Proposal
A consumer proposal is a legal agreement between you and your creditors that allows you to pay off a portion of your debt over a specified period of time. During this time, you are still responsible for filing your taxes as usual, and it is important to understand how your consumer proposal will affect your tax returns.
If you have filed a consumer proposal, you will be obligated to file your income taxes as usual, for yourself. If you owed the CRA for anything during the year of filing the consumer proposal or any prior years, the CRA will keep your refund, otherwise you will get it as usual.
Income Taxes in Bankruptcy
If you have filed for bankruptcy, your financial situation is more severe. During bankruptcy, you are required to turn over all of your assets, including any income tax refunds, to the trustee, who will use the funds to pay off your creditors.
When it comes time to file your taxes, the trustee will file your taxes for you during the first year of the bankruptcy. If you are entitled to a tax refund, the trustee will receive the refund and send it to your creditor.
Bankruptcy and Consumer Proposals are not easy to navigate. Listen to some tips by our Trustee and reach out for more details.
This video discusses the importance of filing your income taxes now.