Scared to Death of Taxes
Posted on: June 30, 2014Posted in Bankruptcy, Debt, Expenses, Finances | Comments Off on Scared to Death of Taxes
Death and taxes are inevitable. For some they are the same thing.
Fear of the tax man may be justified. As a creditor he has super collection powers that ensure that most people don’t have a smile on their face when they receive a notice from the Canadian Revenue Agency (CRA).
Among the things the agency can do are charge penalties and interest on all overdue accounts, withhold child tax credits and GST credits, and garnishee your bank account and pay. Without your consent, it can register a lien against your home. And it can take actions without going through a court process, as other creditors are forced to do.
But the news is not all bleak. Some people labour under the misconception that tax debts are not included under a personal bankruptcy. They in fact are, so when you receive your bankruptcy discharge, back taxes are usually included.
This is, if you owe the government less than $200,000 in back taxes. If you owe more in personal income tax debt, representing 75% or more of your total unsecured debts, then you must appear in bankruptcy court to decide if any conditions should apply to your discharge.
If you are undergoing a bankruptcy, then some special handling of your income taxes is required. The trustee will prepare two tax for you during the course of a year. A pre-bankruptcy income tax return must be filed from January 1 to the date of bankruptcy. Then a post-bankruptcy return must be filed from this date to the end of December.
If there are any funds in a return from the post-bankruptcy filing, then they are paid to creditors. Any taxes owed prior to the bankruptcy are discharged. And if there is an amount owing the government on the post-bankruptcy tax return, then it is up to you pay it.
Negotiating the ins and outs of taxes and bankruptcy can be a tricky and delicate process. Consult an expert at Richard Killen & Associates so you can discover your options and keep the tax man off your back.
