CRA Consumer Proposal and Tax Refund: What You Need to Know

It’s that time of the year again—tax season. If you filed a Consumer Proposal with us in 2023, you might have some questions about how it could impact your 2023 income tax refund. We understand and want to help make the process easier for you.

To help you with your preparation, we’ve put together a few commonly asked questions that we get about how your Consumer Proposal impacts your income tax refund:

Will Farber prepare my 2023 Tax Return?

No, you must file your return for the year 2023 on your own or through your accountant. This return should be prepared for the entire 2023 tax year.

Will Farber contact the Canada Revenue Agency (CRA) about my Refund?

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

How do I contact the CRA about my Refund?

If you haven’t received your refund in a reasonable amount of time, you can call the CRA to discuss the status of your refund. You’ll need a copy of the tax return that you filed for 2022 handy for your call in case they need 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).

What is a Provisional Tax Debt? 

Provisional Tax Debt is any CRA debt relating to the period from January 1, 2023, to the date you filed your Consumer Proposal. If you filed a provisional return with your Consumer 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’ll need to file two separate returns. They must be on paper, and clearly labelled “pre-proposal” and “post proposal.”

What happens to my refund if I owed the 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). The CRA will keep the portion that relates to the Pre-Proposal period and apply it to reduce your previous tax balance owing.  This does not affect your proposal payments.

Will my Child Tax Benefits and other benefits be affected? 

These benefits aren’t usually affected by the delay in processing your tax refund. If you filed your return on time, you shouldn’t see any interruption to your benefits.

Why does my Notice of Assessment show a previous balance? 

When you receive your Notice of Assessment, it may continue to show a balance owing until your Consumer Proposal is fully paid. Do not make any payments towards your previous balance. The year of the proposal tax return is separated into a pre-proposal period and a post-proposal period.  If there is a balance owing, you are only required to pay the post-proposal portion, however you will need to contact the CRA Insolvency department to request that they Pro-rate your return and request the pro-rated balance.  

What happens to my refund if I have Student Loan debt? 

If you had student loan arrears at the time of filing your Consumer Proposal, your pre-proposal refund for 2023 will be applied to your student loan debt. This will happen regardless of when you completed your studies. Even if your studies were completed less than 7 years ago, the CRA will not take your future tax refunds while your proposal is active. If you completed your studies more than 7 years prior to starting the proposal, CRA will not take your future refunds as long as you successfully complete the proposal. 

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).