Filing for bankruptcy is already a confusing and scary step. Mixing it with yet another confusing process, tax filing, can complicate things for you beyond your ability to understand. However, experts generally recommend filing your taxes before filing for bankruptcy for several reasons. This is because you won’t gain anything by filing your taxes afterward.
If you are struggling to keep up with your finances and are considering filing for bankruptcy, you may have several questions in your head. Get your doubts cleared and know about your legal options by consulting with an expert from the Benenati Law Firm today. They will be able to tell you the pros and cons of filing your taxes before and after filing for bankruptcy.
Tax returns and Chapter 7 bankruptcy
When you file for Chapter 7 bankruptcy, you will be asked to produce your most recent tax returns documents. This does not mean the tax return must be from last year, but it should be the one you filed most recently. For example, if the last time you filed for bankruptcy was two years ago, you must produce those documents. Your trustee will also ask for an explanation of the return.
The trustee will compare the income on your tax return to your bankruptcy papers. If you have a refund due, your trustee will determine whether you have a right to protect it. If not, you would be asked to return the amount to the trustee, who would then distribute it among your creditors.
Tax returns and Chapter 13 bankruptcy
Chapter 13 requires you to be up to date with your tax returns before you file. You must produce the documents of your last year’s tax returns before filing for bankruptcy and present them in the creditor’s meeting. If you do not have last year’s tax returns, you will be asked to explain the reason behind it using a letter, affidavit, or certification.
If you owe the IRS a tax return but fail to file it before the meeting, it can weaken your case and increase the chances of dismissal.
- Your trustee will file a motion to give you time to file your tax returns. If you miss the deadline, your case may be dismissed immediately.
- The IRS may have to file a claim based dstvportal on the estimates of how much you owe them. The only problem is that their estimates are often way higher than the amount you owe.
Filing for bankruptcy without the help of an attorney can be a nightmare. Consult with one today.
