When it comes to filing for bankruptcy there is plenty you should consider before filing your petition. One of the most overlooked areas is taxes, and how they interact with the bankruptcy process. Here are some important things you need to know about your taxes in bankruptcy:
- Tax returns – when you file your bankruptcy petition with the court you will be asked information about your financial history, including your prior tax returns. It is important that you have filed your prior tax returns and kept copies for your records. The court may want to review your returns if there is any need for further review of your prior financial transactions.
- Tax debts – there are specific laws about which types of debt can be eligible for a debt discharge. The standards for including tax debts are if they (a) are income taxes, (b) have an associated return filed with the IRS, (c) are at least three years old, and (d) have been assessed by the IRS at least 240 days prior to filing.
- Tax refunds – funds received as part of a tax refund are considered income, and therefore become part of your bankruptcy estate. These funds could be used to satisfy debts to creditors; however, there is no guarantee that they would have to be included.
A St. Petersburg bankruptcy lawyer can help answer all of your questions about taxes and bankruptcy.