jeff
I am self employed. I gross $3,700 per month but I pay overheads (rent and other costs) that add up to $1,400 per month. Therefore i would net $2,300 before taxes which is above the $1,875 per month allowed for a 9 month discharge
question – how does the court look at this because after tax i may be below the $1,875 amount? but that is not certain until I pay my taxes.
Posted from: Ontario
CATID1
Self employed persons are expected to make instalments towards their new tax debt during the bankruptcy. In our firm, we instruct clients to make those payments monthly and then we deduct the taxes paid directly from their income before we assess any surplus penalties.
For example, if you net $2300 before taxes and you have no unusual deductions, we would advise you to pay 20%, or $460 to the government as a tax instalment. That leaves you after tax income of $1840 and therefore you have no obligation to pay surplus.
Some one out there is probably thinking, hey, I could just pay extra taxes and never pay surplus… Remember that your tax refund in the year you file for bankruptcy will go to your trustee for the benefit of your creditors. If you over pay that money will be lost anyway…
Self employed people should make certain they understand all of this works BEFORE they file for bankruptcy.