Bankruptcy And Your Taxes: When To File?
If you are expecting a tax return, or if you are anticipating that you will owe a significant amount of tax debt, you may be wondering when you should file your tax return if you are also planning to file for bankruptcy. In other words, should you wait until after you have filed your taxes to file for bankruptcy, or should you go ahead and file for bankruptcy now, and then file your taxes? It is a complicated question, and there is no single answer. Rather, each individual who is considering personal bankruptcy should discuss the implications of their bankruptcy filing with an experienced bankruptcy lawyer in West Palm Beach who can assist them. In the meantime, our firm can provide you with more information about bankruptcy and taxes.
Considering Your Tax Refund
The timing of your bankruptcy case and filing your taxes is not likely to affect the status of your refund too significantly. In short, if your refund is exempt under Florida’s bankruptcy exemptions, then you will be able to keep your refund whether you receive it (or become entitled to it) prior to filing for bankruptcy, or whether you learn that you will be eligible for a refund after you file your bankruptcy petition and then file your taxes.
You should know that any refund you receive based on your income and payments during the previous tax year will most likely be part of the bankruptcy estate.
Considering Existing or Potential Tax Debt
If you are planning to seek a discharge of existing tax debt, or if you are thinking that you should wait to file for bankruptcy until after you have filed your taxes because you are likely to have significant tax debt, it is critical to understand that tax debt often is not dischargeable. To be clear, the IRS has very specific rules for discharging tax debt in a bankruptcy case, and many kinds of tax debt cannot be discharged.
A key feature of tax debt that may be dischargeable is that it is at least three years old. Accordingly, any tax debt that you have accrued more recently than three years ago would not be dischargeable in your bankruptcy case if you file. Any existing tax debt will only be dischargeable if it is at least three years old and if other requirements are met, depending on whether you are filing for Chapter 7 or Chapter 13 bankruptcy. Thus you should not wait to file for bankruptcy until after you have filed this year’s taxes with the expectation that any tax debt you will soon owe will be dischargeable.
Contact a West Palm Beach Bankruptcy Attorney
Do you have questions about filing your taxes in relation to your plans to file for bankruptcy? These types of filings can present many complications, and it is important to discuss your specific circumstances with an attorney who can help. Do not hesitate to get in touch with one of the experienced West Palm Beach bankruptcy lawyers at Kelley Kaplan & Eller to learn more about the services we provide and how we can assist you with your bankruptcy case.