Filing Taxes After Bankruptcy: Things You Should Know

February 23, 2018

If you’re in the middle of a bankruptcy, you can’t just file taxes as you normally would. A bankruptcy turns your financial affairs into an “estate,” much like if you had died or became incapacitated. There are two types of forms which must be filed.

Two Forms Must Be Filed

A bankruptcy does not absolve you of taxes. You are still required to file the 1040 as an individual taxpayer. It can be helpful to file an extension, to give you more time to finalize the bankruptcy. April 15 can be too close for comfort, especially when you’re dealing with all the paperwork of a bankruptcy.
The trustee is also required to file Form 1041 for the bankruptcy estate. It’s possible that the taxpayer is the trustee. When a debtor files Chapter 11, he or she remains in control of the assets. Not only is the debtor the taxpayer, but also the trustee. Under a Chapter 7 or 13 bankruptcy, the trustee of the bankruptcy would file the tax form.

Tips for Filing

• File your taxes on time every year. Save yourself the aggravation of IRS penalties. Ask for a payment plan if you owe money.
• Keep your tax records. Your trustee will ask how you used any refund money.
• If you are considering bankruptcy, don’t use your tax refund to pay bills. Talk to a bankruptcy attorney about the best way to proceed.
• See your tax advisors and ask for tax preparation assistance after a bankruptcy. You don’t want to accrue new tax debt while you’re getting out from under old debt.
• File taxes before you file for bankruptcy unless you’re getting a substantial refund. Talk to your Encino tax consultants about your best options to maximize your money through your bankruptcy.

Contact Wallace & Associates for professional Los Angeles tax preparation services. We’re available all year long for consultation and information about your taxes and finances.