Is there life after bankruptcy? Absolutely, and it includes taxes. Filing an income tax return after filing for bankruptcy does not have to be a problem, as long as you know what to watch out for, including when and how to file.
“People that file bankruptcy have to make sure that there are a few things taken care of when it comes to filing their taxes,” said Joshua S. Barger, vice president of tax services at Foundation Financial Group in Jacksonville, Florida.
According to IRS Publication 908, Bankruptcy Tax Guide, the Bankruptcy Code requires a debtor to file an individual tax return, or request an extension. If this does not happen, the bankruptcy case can be converted or dismissed. In addition, the bankruptcy trustee is required to file an estate tax return, form 1041, for the bankruptcy estate.
No matter what time of year it is, April 15 can seem too close for comfort -- especially if you are filing or considering filing for bankruptcy. With a little planning and preparation, you will at least know what to do to minimize your stress.
Taxpayers who have made the filing for a bankruptcy and are still currently in the process usually make the mistake of filing their tax return as they normally would. This is not the process that should be taken.
- Joshua S. Barger, vice president of tax services, Foundation Financial Group