Bankruptcy & Taxes
In short, filing for bankruptcy will affect your taxes. However, it does not have to become a problem as long as you know how it works. When filing taxes after bankruptcy there are a few things you must do. According to the IRS’s Bankruptcy Tax Guide, the debtor must file an individual tax return or request an extension. If you fail to do so, the bankruptcy case can be converted or dismissed. Additionally, the bankruptcy trustee is required to file a tax return for estates and trusts, Form 1041, for the bankruptcy estate.
Planning your tax return is stressful and always seems too close for comfort, but with some planning, it can be much easier. Bankruptcy essentially means that you give up your right to handle your own financial affairs and a trustee is appointed to pay back creditors with any assets you own that are not exempt under state or federal law. The confusion that occurs with filing your taxes typically comes from the requirement of needing to file two types of tax forms. The type of tax forms that you must file will depend on the type of bankruptcy you file. Consulting with your bankruptcy attorney and a tax professional will help ensure that you file the proper forms and that your taxes are done properly.
Contact Our Bankruptcy Attorney Today!
Warner & Warner, PLLC is a bankruptcy lawyer serving the Albany, NY area. You may have a lot of questions when it comes to filing for bankruptcy. It is a complicated process that most people are not familiar with. Our attorneys will explain everything to you including your rights, what type of bankruptcy you qualify for, and how it affects your taxes. Contact us today to learn more about our bankruptcy services!