Consumer Proposal and Taxes

Taxes and tax debt can quickly become a major source of stress, especially when they are combined with other financial obligations.

If you are considering a consumer proposal, it is normal to have questions about your tax refund and your tax obligations. Here is what you need to know to better understand your situation.

Can I receive my tax refund if I have filed a consumer proposal?

In general, yes, but not always in full. The treatment of a tax refund in a consumer proposal mainly depends on when it is generated. There are typically two periods: before the proposal is filed (pre-proposal) and after it is filed (post-proposal).

If you have a refund related to a prior period and you owe money to the Canada Revenue Agency (CRA) or Revenu Québec, that amount may be applied directly to your balance. On the other hand, refunds related to subsequent years are usually paid to you, provided that you meet your tax obligations. It is important to note that Revenu Québec generally considers the entire year of the proposal as a post-proposal period.

What is the difference between the pre-proposal and post-proposal periods?

The pre-proposal period includes everything up to and including the filing date (including part of the current year). If you have a debt with the CRA or Revenu Québec, refunds related to this period may be withheld and applied to your tax balance.

The post-proposal period begins after the proposal is filed. Tax refunds for subsequent years are generally returned to you, as long as you comply with your tax obligations, including filing your tax returns on time.

Do I still need to file my tax returns?

Yes, you must continue to file your tax returns every year, even after filing a consumer proposal. This obligation is essential to comply with tax requirements and ensure the proper administration of your agreement.

In addition, any outstanding tax returns must generally be filed before or during the process, so that the CRA or Revenu Québec can properly assess your situation.

Can tax debts be included in a consumer proposal?

Yes, tax debts can be included in a consumer proposal, just like credit cards, lines of credit, or personal loans. This means that amounts owed to the CRA or Revenu Québec can be included in your agreement and settled for a reduced amount, based on your ability to pay.

Once the proposal is filed, interest stops accruing on the included debts, and collection actions, such as calls or garnishments, are suspended. This helps stabilize your situation and allows you to move forward on a clearer financial footing.

What should I do if I have unfiled returns or a large tax balance owing to the CRA or Revenu Québec?

If you have unfiled tax returns or a significant balance owing to Revenu Québec or the CRA, the first step is to bring your situation up to date. You must file all missing returns, as the authorities need a complete picture of your debts to assess your file. Without this, a consumer proposal may be refused.

Personalized support to help you regain control

At Mallette Syndics et Gestionnaires, we understand that behind financial difficulties, there is more than just numbers. There are concerns, difficult decisions, and often a great deal of uncertainty.

That’s why we take the time to listen, answer your questions, and clearly explain each step of the process.

Our role is not only to provide a solution, but also to help you fully understand your situation and the real impact a consumer proposal can have on your daily life, your finances, and your future.