Question from reader in Waterloo Region: I had a consumer proposal accepted by CRA as of July 30, 2010. A tax return to that date was completed by the Trustee.
I want to know if my understanding is correct that I now file a post proposal return from July 31 to December 31, 2010 (exclusive of any of the 2010 pre-proposal income & expenses / deductions).
Answer: Let’s start with the simple part. Preparing your tax return for 2010 will be the same as it has been in prior years. You prepare a normal return for the full year with no special notes with respect to your consumer proposal.
That was clearly not your explanation, so allow me to explain.
The tax “return” to July 30, 2010 was not truly a tax return. It was an estimate of the taxes owing for the portion of 2010 before the date of the proposal. Though it was submitted to the Canada Revenue Agency (CRA) for their review, it was not actually assessed by the government.
The purpose of doing this estimate is so that the amount owing can be included in the consumer proposal. A consumer proposal automatically includes income tax debts only from all prior years; 2009 and early in this instance.
As described above, you are still responsible for filing a normal return for the full year by the regular deadline of April 30. Once the CRA assesses that return, they will subtract the pre-proposal amount from the total amount owing. If the pre-proposal amount had not been estimated, you would be responsible for paying the full amount owing for all of 2010.
If you have further questions, my advice is to speak with your trustee. Part of the trustee’s role is to ensure that you understand your various duties and responsibilites to perform your consumer proposal or to be discharged from bankruptcy.
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