Before you consider filing bankruptcy, it may be a good idea to get your tax returns up-to-date. If you have not filed required income tax returns, you will likely be required to file them during your bankruptcy. However, there are advantages to getting your tax refunds filed as early as possible before considering bankruptcy.
Tax returns must be up-to-date when you file for bankruptcy
In order to file a bankruptcy case, you will be required to bring all your federal and state income tax filings up-to-date. If you have a missing tax return within the last four years, it is very likely that the bankruptcy system will require you to file it during the process. Therefore, all tax returns should be filed BEFORE you file for Chapter 7 or Chapter 13 bankruptcy if at all possible.
It is a very bad idea to wait to file your tax returns after you file for bankruptcy. This is because you only have a short time to complete your tax returns during the active bankruptcy process. In addition, you will likely lose any tax refunds owed to you from those recently filed returns.
Getting your taxes filed may help you discharge income tax debt
If you have income tax debt that is more than three calendar years old, you can possibly discharge this debt in bankruptcy. However, income tax debt cannot be discharged usually unless you have personally filed your returns. It may not count if the IRS just assesses the tax against you or files your returns for you.
Therefore, it is critical to have all your tax returns up-to-date if you are considering discharging tax debt in bankruptcy. Remember, you also have to wait for two years to pass after you file the return. Income tax debt cannot be discharged until two years has passed from the filing of the return also in most cases.
Before you consider filing bankruptcy to eliminate tax debt, you should talk to an accountant and a bankruptcy lawyer. Getting behind in tax payments can grow into a situation that can be very stressful. Do not live with this stress: make an action plan with an accountant and a bankruptcy attorney to get out of your tax debt. The rules and requirements for discharging tax debts are too complicated to tackle on your own. Call our office for a free consultation.