Jeffrey M. Rosenblum, P.C.
A Fresh Start

Tax filing obligations before and after Chapter 7 bankruptcy

Some people who have filed for bankruptcy believe that they don't have to file income taxes. They often believe that the bankruptcy trustee will handle it. That's a dangerous mistake to make.

If you've filed for bankruptcy since you filed last year's tax return, you still have to either file your tax return on time or get an extension. If you fail to do one of those two things, your bankruptcy case may end up being dismissed or converted.

If you have a Chapter 7 bankruptcy filing, the bankruptcy trustee is responsible for filing an Internal Revenue Service (IRS) tax form (Form 1041) for the bankruptcy estate. However, the individual with the bankruptcy is still responsible for filing their own Form 1040.

If you had tax debt from previous years, some of it may have been discharged as part of your Chapter 7 bankruptcy. However, if you owe money after filing taxes this year, that's considered new debt.

You can't discharge that as part of your current bankruptcy. If you owe a considerable amount, it may be wise to try to work out a payment plan with the IRS or the New York Department of Taxation and Finance.

If you're still considering whether bankruptcy is the best option for you, it's probably wise to go ahead and file your taxes for 2018 first, unless you've done your taxes and determined that you'll be getting a large refund.

It's a good idea to discuss your 2018 taxes, whatever the status of your filing is, with a bankruptcy attorney as you consider whether to file for bankruptcy. If you've already filed for bankruptcy, talk with your attorney to make sure that you're handling your taxes correctly this year. The last thing you need on top of bankruptcy is trouble with the IRS.

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