Are Consumer Proposal Payments
One of the most important aspects of doing taxes is determining if something is tax-deductible or not. Due to financial difficulties, there are many that have engaged in bankruptcies and other options, such as consumer proposals. Consumer proposals are not as severe as bankruptcies, allow the consumer to maintain control over assets, and enables the consumer to pay portions of the unsecured debt owed within a maximum five year period.
Though the sum paid is less than the actual amount owed, the creditors accept this payment as being ‘in full.’ Moreover, interest does not accrue during the consumer proposal period and the consumer can focus on paying the principal, without being hassled by creditors.
However, once tax season comes around, people that make consumer proposal payments wonder if these payments are tax-deductible. To begin with, once the person files a consumer proposal, taxes are treated differently, as compared with those of bankruptcies.
First, you do have to keep filing taxes, but you will get to keep the tax refund. In the consumer proposal, the repayment amount is set monthly and does not increase or decrease, unless the consumer refiles for a new proposal with a different payback rate.
The filing of taxes is required during the consumer proposal and, the failure to do so, could mean that the agreement is interrupted. Despite the benefits, the consumer proposal payments are not tax-deductible, regardless of how the consumer proposal is conducted by a government agency. Therefore, you cannot consider the consumer proposal payment when determining your deductions when doing your taxes. However, not all is lost — you are still paying down your debt in a controlled environment and at a lower rate than you would have had to — without the hassle of collection calls and interest accumulations on the debt.