Bankruptcy and Back Tax Returns

Posted on 18. Jun, 2012 by in Back Tax Returns, Filing back tax returns, How to File Back Tax Returns

It is illegal not to file taxes, but if you are filing for bankruptcy you could run into even more trouble if there are back tax returns yet to be filed.  This is because in a bankruptcy, all tax returns must be filed before the Meeting of Creditors.  The reasons for this are many, but the two most important are that the tax returns give the bankruptcy court and idea of income and debt, as well as any refunds that can be claimed by creditors.

Generally, the Meeting of Creditors occurs 30 to 45 days after the case if filed.  This means that if a bankruptcy is in the near future, any back taxes need to be filed as soon as possible.  If they are not, the consequences could be dire.  The most notable is that the case could actually be thrown out.

If the case has already been filed, all is not lost.  An extension of the meeting can be requested and may be granted.  Keep in mind too however, that for a chapter 13 bankruptcy all returns must be filed for the past four years.  If taxes have not been filed in a while, this could take a great deal of time.

Another option that the court has rather than throwing the case out is to convert the bankruptcy to a chapter 7, which separates the tax payer and the estate so that estate has a separate tax return.  In this case, tax returns will be filed for each, a form 1040 for the individual and a form 1041 for the estate.

Whatever the case may be, tax returns must be filed, and when filing for bankruptcy this becomes even more important if there are to be any hopes of the bankruptcy being approved.  For those considering the possibility of a bankruptcy in the future, it is imperative to ensure that all tax returns are filed and in order as soon as possible.  The Meeting of Creditors can be postponed for a bit, but if there are any hold ups the case may get thrown out before everything is in order.  The best bet is to have everything in order before petitioning.

As a professional CPA firm with a combined 25 years of experience, we help clients file back tax returns during the bankruptcy process.  Call us today at 1-888-570-1033.

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