Individuals who are looking to file for bankruptcy often wonder if they have to file their tax returns before or after they file for bankruptcy. In short, all tax returns must be filed before individual files for bankruptcy. When individuals file for bankruptcy, they must send certain documents before their 341 Meeting. A bankruptcy attorney will typically ask for two years of tax returns before filing. These tax returns will be sent to the trustee so they can see what kind of income the individual has had. Many individuals assume that if they don’t do their tax returns before they file, they won’t have to supply them. Unfortunately, this is far from true. The bankruptcy trustee will request these returns. Thus, before filing for bankruptcy you should have them completed.
What If I am Getting a Tax Refund before My Bankruptcy Hearing?
If you are getting a tax refund before your bankruptcy hearing, then you will want to make sure that your refund can be exempt. Exemptions allow individuals to keep their tax refunds, only if, the tax refund falls within the exemption. In New York and New Jersey, a wildcard exemption can be used to exempt tax refunds. A bankruptcy lawyer can review your assets and exemptions to determine if your tax refund will be safe from the trustee.
Any tax refund that does not fall within an exemption, can be taken by the bankruptcy trustee to pay off some of the individual’s creditors.
Will I Owe Taxes if I File For Bankruptcy?
No. Unlike many debt settlement programs, where people are taxed on the forgiven amount, when you file for bankruptcy there are no tax implications. This means that individuals can file for bankruptcy, get their debt discharged, and not have to worry about owing the IRS any money.
What if Taxes Aren’t Due Yet? Can I file My Taxes After My Bankruptcy?
Yes. You can file your taxes after your bankruptcy. However, you will want to ensure that your tax refund will be exempt if you plan to wait. Moreover, you will want to make sure that your tax return matches everything that you have listed on the petition. For example, if you say you are a household of three, then your tax return should reflect this.
Karra L. Kingston Esq. has helped many people get out of debt. If you are worried about your tax refund or have questions about your tax returns and filing bankruptcy, Karra can help you. Karra L. Kingston works with every individual to ensure that they have all of the required documents they need to make the bankruptcy process proceed smoothly.