The holiday season is almost over and January 1 is the official start of tax season. For people considering bankruptcy, it’s also a time to start getting those 2009 tax returns promptly. I’ve written about this important subject before, and it’s worth bringing it up again on the eve of tax season. Here’s why.
Chapter 13
First, it’s important to remember that tax returns must be provided in chapter 13 cases. The debtor must have all tax returns filed for all tax years – this includes 2009. Bankruptcy Code Section 1308 provides:
(a) Not later than the day before the date on which the meeting of the creditors is first scheduled to be held under section 341(a), if the debtor was required to file a tax return under applicable nonbankruptcy law, the debtor shall file with appropriate tax authorities all tax returns for all taxable periods ending during the 4-year period ending on the date of the filing of the petition.
(b) (1) Subject to paragraph (2), if the tax returns required by subsection (a) have not been filed by the date on which the meeting of creditors is first scheduled to be held under section 341(a), the trustee may hold open that meeting for a reasonable period of time to allow the debtor an additional period of time to file any unfiled returns, but such additional period of time shall not extend beyond–
(A) for any return that is past due as of the date of the filing of the petition, the date that is 120 days after the date of that meeting; or
(B) for any return that is not past due as of the date of the filing of the petition, the later of–
(i) the date that is 120 days after the date of that meeting; or
(ii) the date on which the return is due under the last automatic extension of time for filing that return to which the debtor is entitled, and for which request is timely made, in accordance with applicable nonbankruptcy law.
This awfully wordy code section essentially tells chapter 13 debtors to have their tax returns filed before the creditor’s meeting. If it’s not, the trustee may continue the meeting until it is filed – but only up to 120 days. And if it is still not, the case can be dismissed. Don’t rely on an extension (either asking for one, or a request that has already been approved before you file).
Chapter 7
If you’re considering filing a chapter 7 case, the tax issues are a little different. If you expect to owe taxes, that fact is important for your attorney to know in preparing your bankruptcy case (even in chapter 13).
But if you’re like many people, you expect a refund. That refund – depending on where you live and other factors – may not be yours to keep. The refund (or a chunk of it) may be an asset of the bankruptcy estate. In other words, it will be used to pay your creditors… and not for what you need or want your refund to do. Plus, depending on your local rules or standing orders, you may be required to turn over tax refunds to the chapter 7 trustee and things might go horribly wrong if you don’t.
Whether you can actually keep your tax refund will depend on a number of factors. State by state, personal property exemption laws are different. Plus, there might be other factors in your personal circumstances that require consideration. Speak with an experienced bankruptcy attorney who can competently guide you on the right path and the best result.
Related posts:
- Storm Preparation: Bankruptcy & Tax Returns II
- Would-a, Should-a, Could-a.
- Furnishing Tax Returns to Creditors
- Storm Preparation: Bankruptcy & Tax Returns
- 6th Circuit Orders Turnover of Tax Refund
Tags: Taxes and Tax Returns
