Law Office of Rick Morin, PC

Going through a Chapter 13 Bankruptcy can be confusing enough without tax season sneaking up behind you. In this post, I will go through some frequent questions regarding Chapter 13 bankruptcy and taxes. 

What returns are due?

According to the Bankruptcy Code, all Chapter 13 debtors must file all required tax returns for the years ending within four years of your bankruptcy filing. If you’re going to be asking the government for assistance in the form of bankruptcy, the IRS expects that you have played by their rules and filed all of your tax returns. Makes sense!

In addition, you’ll also need to stay current with all applicable federal, state, and local tax returns throughout your bankruptcy. A typical Chapter 13 bankruptcy will last between 3 and 5 years, so it is important to stay on top of your taxes during that time. Even one missed return can put your bankruptcy at jeopardy! 

When should I file?

The federal tax returns for the four preceding years must be filed before your Bankruptcy Hearing, or “Meeting of the Creditors”. You can however, apply for an extension for 120 days if you need to. In general though, it’s always best to file as soon as possible so that all debts are known beforehand. (It can also take some time to verify that all the correct returns were filed.)

What will happen if I don’t file?

If for whatever reason you don’t file your tax returns, your Bankruptcy Plan may not be confirmed. This may result in your case being dismissed. You should also note that interest and penalties will be charged on returns not filed by the due date under the Internal Revenue Code. For more than just bankruptcy reasons, it is critical that your taxes are filed on time each year. 

Where can I get proof of filing?

Your bankruptcy trustee may ask you to submit copies of transcripts of your tax returns as proof of filing. If you don’t have the copies you can request a free transcript from the IRS website, www.irs.gov or submit a Form 4506-T, Request for Transcript of Tax Return, with the IRS by calling 1-800-908-9946. Keep in mind this process may take 10 to 15 days after the request is received. When you go to court for your Meeting of Creditors, it is best to have all of your tax-related issues sorted. If not, the bankruptcy trustee may continue your hearing to allow you time to resolve any issues. 

Have more questions?

If you’re planning on filing for a Chapter 13 Bankruptcy and have more questions regarding your situation, please call my office at (916) 333-2222.