Tax Returns

April 30th, 2010 by Questions

I am currently in bankruptcy process where I obtain surplus income each month and pay the trustee accordingly.
In a tax refund, this would normally be considered addtional monies that I should have received as surplus. Therefore, why would I have to give 100% of the refund when this would have been considered surplus income and I would have to pay a percentage thereof. I pay additional taxes each pay cheque as a buffer.
For example: If I pay $50 per month in addtional taxes this would reflect in my net pay and and reduces my surplus by $50 or $600 a year. If I did not pay that additional tax then I would hypothetically pay $300 out of that $600 of surplus income. But since I don`t, I now have to pay 100% because it was returned to me from CRA. I don`t understand the logistics.
Hypothetically, the more you pay in income tax whether it`s your employer taking too much or you putting addtional monies in, you get burned for 100% of the additional monies.

Posted from: Ontario


One Response to “Tax Returns”

, Barton Goth - Goth & Company Inc. -Trustee in Bankruptcy said:

The problem you have is that tax refunds are not the same as income. Income is subject to the surplus income obligation in bankruptcy, but tax refunds are considered an asset and therefore are treated differently.

While I understand your argument, as soon as the monies are deducted off of your pay cheque, they no longer fulfill the definition of income and the legislation is very clear on this. So the net result is you need to pay your surplus, you lose your income tax refunds for the year of bankruptcy or any previous year and that is part of the price you pay to have your creditors rights stayed and your unsecured debt cleared.

Please post a follow up comment below:

(Note: comments are reviewed by moderators and then posted after approval. In addition, due to high volume some of the comments might not be posted.)