Navigating Your Taxes after Filing for Bankruptcy
Tax season is upon us and those who have filed for bankruptcy may be wondering if they have to file for taxes. The answer is simply, yes. Filing taxes after filing for bankruptcy does not have to be a big ordeal. Keep in mind that there are aspects to filing to look for pertaining to when and how to file.
According to the Bankruptcy Tax Guide provided by the IRS, a debtor is required to file and individual tax return or request an extension. The trustee must file an estate tax return known as the 1041 form.
Here are a few ways you can file for a tax return post-bankruptcy.
How to File a Tax Return Post-Bankruptcy
Much of the confusion stems from the requirement of filing two types of tax forms. As mentioned above, one is for the individual while the other is for the bankruptcy case. This is due to the fact that when one files for bankruptcy, a trustee becomes in charge of your financial affairs. Your affairs are now known as an estate.
A debtor who has filed for chapter 7 bankruptcy will file an individual 1040 as they would at any other time. A separate form, the 1041 form, must be filed separately for the estate by the trustee.
Chapter 11 debtors differ as they have to file both forms themselves. This is because chapter 11 debtors remain in control of their assets. Keep in mind that in both cases, they must file the 1040 and 1041 forms.
When filing for Chapter 13 bankruptcy, the debtor pays a disposable income into a monthly plan but the trustee will also have to file a 1041 form.
Keep in mind that debtors must not accrue new debt once they have filed bankruptcy. This includes not paying your taxes.
What to Keep In Mind
Individuals filing their taxes after bankruptcy should seek the help of a professional attorney. If you have filed before seeing an attorney, make sure they look at the return.
If you have not filed for taxes, consider doing so before filing for bankruptcy unless you are getting a large refund. If you have, do not pay bills with the money as it can slow down the bankruptcy process.
Always make sure to file your taxes every year.
Residents of the Sacramento area can look to Liviakis Law Firm for guidance. Contact us at (916)459-2364 for a free consultation.