Consumer Proposals and Your CRA Tax Refund: What Happens to Your 2025 Refund?

Tax season appears to be over, but you may still have questions about the filing of your tax return for the 2025 tax year, which is only supposed to be filed in early 2026. If you filed a consumer proposal with us in the year 2025, you might have some questions about how it could impact your CRA tax refund.

To help you prepare, we’ve put together answers to some of the most commonly asked questions about how a consumer proposal affects your income tax return, your CRA refund, and whether your payments are tax deductible.

We’ll also cover popular questions like:

• Are consumer proposal payments tax deductible?
• How do I check my CRA refund after filing a proposal?
• What if I owed taxes or had student loan debt?

Let’s break it down.

How to File Your Consumer Proposal Tax Return in 2025

Will Farber prepare your tax returns? No, you must file your tax return for the year 2025 on your own or through your accountant or tax preparer. This return should cover the entire 2025 tax year.

If your consumer proposal was filed in the year 2025, CRA may require you to submit a provisional pre-proposal tax return: one for the pre-proposal period (from January 1 to the date you filed your proposal). This is just an estimate of your taxes owed, if any, for the period before the filing of the proposal, that will be released as a debt through the proposal filing.

Then, once your return is filed in full for the 2025 tax year, in early 2026, CRA may be contacted to pro-rate the return. In other words, if you receive a refund for the 2025 year, the pre-proposal period refund will go to CRA debt included in the proposal, and you should receive the refund that is owed to you for the period from the proposal date to the end of the year.

Vice versa, if you have a tax amount owed for the 2025 year, the CRA debt owed for the pre-proposal period will be included in the proposal as a debt to be released. The CRA debt owed for the period from the date of the proposal to the end of the 2025 tax year will have to be paid by you. CRA fairly pro-rates the tax returns for the year that you file a consumer proposal. Please just get in touch with Farber to allow them to contact CRA on your behalf to assist with this fair pro-ration.

CRA Refund After Filing a Consumer Proposal: How to Check Your Status

We don’t have access to speak to CRA on your behalf, but you can. If you haven’t received your refund in a reasonable amount of time, you can call CRA to discuss the status of your refund. You’ll need a copy of the tax return that you filed on hand for your call in case they need to confirm your identity by asking you about specific line-item numbers on your most recent tax return filed.

You can reach the CRA insolvency line at 1-866-248-1576 (ON, QC, Atlantic) or 1-866-891-7403 (Pacific).

Understanding Provisional Tax Debt in 2025

Provisional Tax Debt is any CRA debt relating to the period from January 1 of the tax year to the date you filed your Consumer Proposal. If you filed a provisional return with your Consumer Proposal, this will estimate the amount of tax you may owe for this period before the date of the consumer proposal.

What Happens if You Have a Consumer Proposal and Owe Taxes?

If you had a balance owing to the CRA when you filed your consumer proposal, part of your refund may be held back.

Here’s what typically happens: The CRA looks at when you earned your income and splits your tax refund accordingly. Your consumer proposal payments won’t be affected, but the portion related to the time before your proposal was filed can be applied to any outstanding debt. The remaining portion — earned after your proposal —may still be returned to you, depending on your eligibility.

Example: Let’s say you filed your consumer proposal in March 2025 and are entitled to a $2,000 refund. If $700 of that refund was earned before your filing date, CRA may apply that $700 to your existing tax balance. The remaining $1,300 could be refunded to you, assuming there are no other offsets.

Keep in mind that CRA procedures around pre- and post-proposal refunds can vary depending on your situation. If you’re unsure how your CRA tax refund will be handled in relation to the filing of a consumer proposal, it’s best to speak with your Trustee or contact CRA directly.

CRA Refund After Consumer Proposal: Impact of Student Loan Debt

If you had outstanding student loan debt when you filed your proposal, it could affect how your tax refund is handled.

Just like with other tax debts, CRA will usually apply the pre-proposal portion of your refund to your student loan arrears. In some cases—especially if you’ve defaulted on payments or if it’s been less than seven years since you finished school—they might also flag the post-proposal portion.

For example: If you filed a proposal in April 2025 and are owed a $1,500 refund, and $900 of that was from pre-proposal income, CRA may apply that $900 toward your student loans. The remaining $600 may be refunded to you—unless other debts are outstanding.

To protect your CRA refund after the filing of a consumer proposal, make sure your student loan status and payment history are clear and up to date.

Consumer Proposal Tax Return: Understanding Your Notice of Assessment

When you get your Notice of Assessment, don’t be alarmed if it still shows a balance owing—even after you’ve filed your consumer proposal. That’s pretty common, and it doesn’t mean you need to start making payments.

Here’s what’s happening: CRA splits the tax year into two parts—the time before your proposal (pre-proposal) and the time after (post-proposal). You’re only responsible for paying the post-proposal portion.

To sort things out, you’ll need to call the CRA Insolvency Department and ask them to pro-rate your return. That just means they’ll recalculate your balance based on how much of the year came after your proposal was filed—so you’re only being asked to pay what’s actually yours to cover.

Will My Child Tax Benefits or Other Benefits Be Affected?

Good news: benefits like the Canada Child Benefit usually aren’t impacted.

Still, delays in processing your CRA consumer proposal tax return could cause hiccups. That’s why filing on time and double-checking your CRA account is key.

Are Consumer Proposal Payments Tax Deductible in 2025?

In most cases, consumer proposal payments aren’t tax deductible in Canada. Since they’re considered personal debt repayments, CRA doesn’t count them as something you can write off.

That said, there are a few rare exceptions—like if the debt was tied to a business expense or something related to earning income. But for the majority of people, these payments don’t come with a tax break.

Not sure if your situation qualifies? It’s always a good idea to check in with your Licensed Insolvency Trustee or accountant to get advice based on CRA’s actual 2025 rules.

Need Help with Your Consumer Proposal Tax Return?

Don’t let tax season stress you out. Whether you’re figuring out how to file or want to understand your CRA consumer proposal tax refund or a process to filing one, we’re here for you.

Book a free consultation today and get expert advice tailored to your specific situation.