Taxes are a part of our government body, created to support a framework of opportunity for people, families, and local communities. Here’s another fact: Our forefathers had incorporated bankruptcy into the constitution. Sure, the laws regarding bankruptcy have been tweaked over the years, but it has always been part of this country’s history. Thankfully, bankruptcy protection has expanded from businesses to also include individuals who are struggling to get out of debt.
Sound financial decisions
Whether we look at how the government spends our money, or at how we spend our money; it’s important to recognize where we have the most control in order to make the most of our lives. Good intentions do not equal good design. If throwing more money into a deficit isn’t fixing the problem, you may need new plan to eliminate the debt. One can absolutely take control of personal debt that has spiraled out of control. Bankruptcy law eliminates certain debts so that a new plan and a fresh start can be established. Basic tax returns are pretty cut and dry but if you’ve filed bankruptcy, are in the in the middle of a bankruptcy, or are considering a bankruptcy…you may have some questions about how it would or could potentially affect your tax returns.
A Few Things to Note Regarding Bankruptcy and Paying Taxes
• Bankruptcy or discharge of debt is not considered taxable income.
• With Chapter 7 bankruptcy, you’re still required to file an individual tax return. There are special considerations and options that your attorney will review with you.
• With a Chapter 13 bankruptcy, you’re also required to file your tax return as usual.
• Some taxes may be dis-chargeable in bankruptcy, but discharge of tax debt depends upon the details and circumstances of your personal bankruptcy case. Your bankruptcy attorney can clarify this for you.
• While in bankruptcy, you can receive tax refunds. But, they could potentially be delayed or used to pay down tax debt fees. Your bankruptcy lawyer can help determine if this applies to your case or not.
• Filing bankruptcy will not stop a tax audit.
If you have found yourself considering bankruptcy, don’t think about it as a failure, but as an opportunity to start new again.
You’re not alone, filing Bankruptcy happens and it’s a not the end…but a new beginning. The bankruptcy process is not complicated if you hire an experienced bankruptcy law firm. The best advice regarding bankruptcy and filing tax returns is to consult your bankruptcy lawyer if you have filed for a Chapter 7 or Chapter 13 bankruptcy. If you are considering filing bankruptcy, consult a bankruptcy attorney. Legal processes such as bankruptcy depend greatly on each individual set of circumstances. Debt Advisors Law Offices offers a free initial consultation to evaluate your situation and steer you in the right direction. Pay taxes responsibly; don’t risk having to pay penalties, fees and interest on unpaid taxes. Contact the IRS directly for tax-related questions that do not involve bankruptcy.