Four Helpful Tips for Filing Your Taxes after You’ve filed for Bankruptcy

So you’ve just filed for bankruptcy and you’re thinking this is probably what rock bottom looks like, but then you realize you’ve only fought half the battle. The other, equally frustrating, half remains – filing taxes. Here are four helpful tips that can minimize the complexity of filing for taxes and maximize potential refunds if you filed bankruptcy last year.

File on Time

Make it a habit to file your taxes on time every year—no matter what your financial situation is. The Internal Revenue Service individually assesses and penalizes failure to file and failure to pay. Even if you don’t file, you will eventually land on IRS’ crosshairs. Save yourself both the money and time by adhering to the mid-year deadline. Use post-its and notes on your devices to leave a reminder regarding tax preparation for each year. Having a regular schedule will make the process less tiring. Giving yourself enough time to gather and complete any paperwork will ensure that you file by the April 15^th deadline.

Know Which Items Can Be Discharged

It is important to know that not all tax debt can be discharged during bankruptcy. Items labelled as priority debt cannot be discharged. This includes student loans, DUI charges, child support, etc. Priority debt must be repaid in its entire amount in a Chapter 13 reorganization. In order for taxes to be discharge-able during bankruptcy claims, they must be labelled as personal income tax and should be at least 3 years old beginning from the due date of tax return including extensions.

Consult a Professional

The ins and outs of tax filing is already inherently tricky, much more if you are filing for taxes after declaring bankruptcy. A professional tax adviser can help you navigate through pertinent paperwork and give you confidence that all areas are addressed. A tax preparer or attorney can also maximize the refunds you may be eligible for. The bankruptcy trustees in Edmonton at Exelby & Partners Ltd. suggest that you keep in close contact with a financial professional after you file for bankruptcy as you try to rebuild your finances. Even if you have filed your taxes on your own in the past, they will likely be a little more tricky due to the bankruptcy, so seek the necessary help to get the job done correctly.

Building New Debt While Bankrupt

Filing for bankruptcy denotes that a debtor may not accrue any other delinquent credit while under the court’s supervision. New credit that a person accrues while already bankrupt is not safeguarded from collection by authority because it was not disclosed during the initial filing.

If you are being audited by the IRS, bankruptcy will not cease the audit. It will stop collection agencies from spamming you emails and phone calls while the bankruptcy case is awaiting approval and if there is no Relief of Stay motion from the Internal Revenue Service. Although, the 10-year statute of limitations is stretched for the whole period of the bankruptcy proceedings in addition to the 30-day period for administrative action. Consider this prior filing your bankruptcy case.

If you filed for bankruptcy last year, you have probably had your fill of financial frustration, yet taxes are something that cannot be ignored. No matter what your financial situation is now, it will be no small task to get your taxes in order. Take the time to ensure everything on your taxes is correct, and avoid any additional financial headaches.

Tags: Bankruptcy, Filing Your Taxes, Internal Revenue Service

Category: Taxes