What are the Options for Tax Debt Relief?
By :David Noronha, Vice-President Licensed Insolvency Trustee with BDO Debt Solutions
As a Licensed Insolvency Trustee, I am often asked whether a bankruptcy or a consumer proposal will eliminate income taxes owed by an individual. The short answer is “yes”. The Bankruptcy and Insolvency Act, which governs all consumer proposals and bankruptcies, allows the inclusion of a person’s unpaid income taxes in an insolvency proceeding. A Licensed Insolvency Trustee is the only professional that can legally eliminate income tax debt through a consumer proposal or bankruptcy.
When tax debt is included in a consumer proposal or bankruptcy, it is important to remember that you are requesting Canada Revenue Agency (CRA) to acknowledge and to recognize the income tax debt and to allow it to be written off. Therefore, it is extremely important that all your income tax returns be filed up to date. CRA will view this as an important aspect in deciding whether to allow the debt to be eliminated. As well, it is a legal requirement that all income tax returns be filed, even if you cannot pay the amount owing as reported on the return.
If you file a bankruptcy, the Licensed Insolvency Trustee will assist you in filing your personal income tax returns for the year prior to your bankruptcy and for the year that you file for bankruptcy. You are responsible for filing all other outstanding personal tax returns. In most cases, if the amount you owe for unpaid taxes is not excessive relative to your other unsecured debts, then CRA will allow the debt to be written off.
If you want your unpaid taxes to be included in a consumer proposal, you must ensure all your personal income tax returns for the years prior to your consumer proposal are filed up to date. If the consumer proposal is accepted by your creditors and is approved by Court, then the income taxes owing are included in the consumer proposal. When your consumer proposal is successfully completed, then the income taxes that are included in the consumer proposal will be written off. You will be responsible for paying any taxes owing after your consumer proposal if filed.
Tax debt can be stressful and overwhelming. If you have income taxes owing and you are unsure what steps to take, a BDO Licensed Insolvency can explain your options for tax debt relief. To schedule a free, no-obligation consultation, call 1-855-BDO-DEBT or visit DebtSolutions.bdo.ca.debtsolutions.bdo.ca
BDO Debt Solutions is one of Canada's oldest and largest debt help firms, helping Canadians find the right solutions to their debt problems since 1958. At BDO Debt Solutions, we know that debt can feel overwhelming. Each year, we help thousands of Canadians in Ontario eliminate their debt. We will listen to your story and ensure you understand all options available to you – from budgeting and debt consolidation to a consumer proposal and bankruptcy. Then, we help you choose the debt solution that is right for you. With dedicated support and one-on-one counselling from our dedicated team of debt professionals, you can turn the page on debt.
About the Author:
David Noronha is a Vice-President Licensed Insolvency Trustee with BDO Debt Solutions. He manages the BDO Debt Solutions Newmarket and Peterborough offices, and surrounding areas. David has over 30 years of experience in the insolvency profession, having practiced in BDO’s Toronto, North York, Markham and Barrie offices before taking charge of the Newmarket and Peterborough offices. He helps individuals who are experiencing financial distress find constructive solutions to their debt problems and concerns. David also has extensive experience helping small to large businesses in a variety of industry sectors. He has acted on behalf of all stakeholders involving such engagements as business viability reviews, bankruptcies, proposals, receiverships and restructuring proceedings under The Bankruptcy and Insolvency Act.