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How a Consumer Proposal Impacts Your 2021 Income Tax Refund

It’s that time of the year againtax season. If you filed a consumer proposal with us in 2021, you may have some questions about how your consumer proposal could impact your 2021 income tax refund. We understand and want to help make the process easier for you.

Here are a few commonly asked questions that we generally get about how your consumer proposal impacts your Income Tax Refund. We hope that they will help you as you go through your tax preparation:

Will Farber be preparing my 2021 Tax Return?

No, you must file your return for the year 2021 on your own or through your accountant. This return should be prepared for the entire 2021 tax year.

Will Farber contact CRA about my Refund?

Unfortunately, we have no authority to speak to CRA on your behalf.

How do I contact CRA about my Refund?

If you have not received your refund in a reasonable period, you may call CRA to discuss the status of your refund. You will need a copy of the tax return that you filed for 2021 handy for your call as they are likely to confirm your identity by asking you about specific line numbers on your return. You can reach the CRA insolvency line at 1-866-248-1576 (ON, QC, Atlantic) or 1-866-891-7403 (Pacific).

If I did not have any CRA debt when I filed my proposal, will there be a delay in getting my refund?

If you filed a provisional return with your proposal, and it is more advantageous to report income and expenses during the period it was earned i.e., pre-proposal vs. post-proposal, then you will need to file 2 separate returns, on paper, and clearly labelled pre-proposal and post proposal.
Most consumer proposals do not contain provisional returns and so you will already know if you fall into this category. Yes. CRA needs to confirm that there is no tax debt from 2021 and prior and that there is no Provisional Tax Debt.  

What is a Provisional Tax Debt? 

Provisional Tax Debt is any CRA debt relating to the period from January 1, 2021, to the date you filed your consumer proposal. If you filed a provisional return with your proposal, and it is more advantageous to report income and expenses during the period it was earned i.e., pre-proposal vs. post-proposal, then you will need to file 2 separate returns, on paper, and clearly labelled pre-proposal and post proposal. Most consumer proposals do not contain provisional returns and so you will already know if you fall into this category.

What happens to my refund if I owed CRA when I filed my proposal?  

Your refund is divided into two parts, January 1 to the date you filed your consumer proposal (Pre-Proposal Period) and the rest of the year (Post-Proposal Period). CRA will keep the portion that relates to the Pre-Proposal Period.

Will my Child Tax Benefits and other benefits be affected? 

These benefits are not usually affected by the delay in processing your tax refund. If you filed your return on time, you should see no interruption in your receipt of benefits.

Why does my Notice of Assessment show a previous balance

When you get your Notice of Assessment, it will continue to show a balance owing until your proposal is fully paid. Do not make any payments towards your previous balance – you only need to pay the amount owing (if any) for the 2021 tax year.

What happens to my refund if I have Student Loan debt

If you had student loan arrears at the time of filing your proposal, your pre-proposal refund for 2021 will be applied to your student loan debt. This will happen regardless of when you completed your studies.  If your studies were completed less than 7 years ago, CRA will not take your future tax refunds while your proposal is current.

For more information on how your consumer proposal may impact your income tax refund, it is best to speak to your accountant or contact the CRA insolvency line at 1-866-248-1576 (ON, QC, Atlantic) or 1-866-891-7403 (Pacific).