Income Tax During Bankruptcy

April 30th, 2009 by Questions

I filed for bankruptcy in Sept 30 2008 and will be discharged June 30 2009…I gave all my income tax information to the trustee as directed, and they just sent me a `post bankruptcy tax return` document stating i owe CRA $400…I file my taxes every year and have always received a refund, even tho small, I do not understand how i could possibly owe this year 2008, and if i do owe would it not be covered in my bankruptcy debt? Could you please explain.

Posted from: Ontario


One Response to “Income Tax During Bankruptcy”

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

When the trustee has to do your taxes for the year of bankruptcy they must be broken in to two components, before and after the bankruptcy. As a result all the tax credits must be pro-rated based on the number of days in each period. Sometimes, especially if someone’s income is not spread equally across the year and more heavily weighted in the second half of the year the result can be a small amount owing for the post period. Make sure you review this return to ensure it is correct, but it is definitely possible that there is a small amount owing simply due to income distribution and how that relates with the prorated tax credits.

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