Trouble with CRA
A year ago my wife and I were audited for the 2002-2004 tax years for our personal and business income. (We live in Ontario, if that mnakes a difference).
After a previous audit (for the years 1996-1998) we were given specific instructions by the auditor as to how our returns were to be prepared in the future. Our accountant followed those instructions, but the new auditor has decided that the previous auditor was wrong, and has reassessed us for a total of $170,00 owed for the years 2002-2004 (there has been no change in legislation, nor any precedent that we can find to justify the change, and a year later CRA still won’t answer any requests for more information, but that’s another story..).
My question is this: If my wife and I both declare bankruptcy, and CRA assess us at a later date for tax years 2005, 2006 in the same way (which the auditor has hinted will happen)will we have to go through bankruptcy a second time? There is no hope we will ever have the money to pay those debts.
The short answer is NO. When you file bankruptcy you create a line in your financial history – debts that relate to the period prior to the date on which you filed are automatically included in your procedure.
A tax re-assessment, even if it occurs after the date you filed, still relates to the year that was re-assessed and therefore will be retroactively included in your bankruptcy too.