How does my bankruptcy affect my annual income tax return?

In your year of bankruptcy two income tax returns must be filed with Canada Revenue Agency. 

  1. a pre-bankruptcy return, is for the period January 1st to your date of bankruptcy.
     
  2. a post-bankruptcy return, is for the period from your date of bankruptcy to December 31st. 

In addition, your Trustee must ensure your prior-bankruptcy income tax returns are filed for the year, or years before your bankruptcy. 

Refunds 

Any income tax refunds for any prior years, and the pre-bankruptcy and post-bankruptcy periods will be sent by Canada Revenue Agency directly to your bankrupt estate for the benefit of your creditors as directed by the Office of Superintendent of Bankruptcy. 

Income Tax Debt Greater than $200,000 

Your discharge from bankruptcy must be opposed by your Trustee if you have $200,000 or more of personal income tax debt, and your personal income tax debt represents 75% or more of your total unsecured debts. You must appear in bankruptcy Court before a registrar who will determine the outcome of your bankruptcy discharge.

Any income tax debt at the date of bankruptcy less than $200,000 will be discharged when you receive your discharge from bankruptcy. 

New Income Tax Debt 

Any post-bankruptcy income tax owed is considered to be new debt. You are required to pay this amount when it is due to Canada Revenue Agency. 

Your Trusteeis Not A Bookkeeper, Accountant or Tax Advisor 

You should note that your Trustee is not your bookkeeper, accountant, or tax advisor. Your Trustee is responsible to see that your tax returns are filed. It is your responsibility to see that you provide your Trustee with the appropriate filing information. This means if you are an employee you would supply your Trustee with your T4 slip plus any family information required. 

Self Employed 

If you are self-employed, then it is your responsibility to have a bookkeeper or accountant assemble your financial data into a summary form which may be used to prepare your income tax return. As a self-employed person you may need independent income tax advice from your own accounting or tax advisor.