Wednesday, August 9, 2017
Can I File Bankruptcy If I Have Not Filed Taxes?
No one likes to file their taxes every year, especially if there is a tax liability to pay. It also takes a lot of time to get your documents in order for a tax preparer, and if you undertake the task yourself it can be confusing to know whether you are preparing your return properly. But if you need to get financial relief, one of the first things you should do is get your tax situation in order. This is because if you are considering filing for bankruptcy, your case can be held up for the failure to file taxes.
You are not necessarily prevented from filing a case if your taxes have not yet been filed, but there will be delays in the swift administration of your case. If you file bankruptcy before you file taxes, you should expect the following things to happen:
• The Trustee will ask you to finalize your taxes and provide them to the taxing authorities present at your 341 hearing rather than sending them to the IRS to process.
• The entry of discharge may be postponed in your case, until taxes are filed. Discharge is the entry in your bankruptcy case that means your debts are no longer due, and this is the reason you file for bankruptcy so it is in your best interest to file your taxes so you can obtain the bankruptcy discharge of debts.
• Taxes are generally not dischargeable in bankruptcy, so not filing your returns will not eliminate the need to pay any tax debt due.
In many cases it is best to file taxes and then file for bankruptcy, because depending on the circumstances present in your case, you may not get to keep any refund you are due. Many people count on a tax refund to get caught up on debts or pay for auto and/or home repairs, if this money is withheld you may not be able to do these things. This is not to say you should file your taxes and immediately spend any refund, but if you have legitimate needs it is excusable to spend a refund shortly before filing for bankruptcy. The key is to keep record of your expenses and be prepared to show the Court what the refund was used for if you do get one and spend it right before filing a bankruptcy case.
If you have more questions about bankruptcy and debt, contact our office. We can be reached by phone, or online at www.law-ri.com.