Bankruptcy and Income Tax Returns
Income Tax Returns and Their Importance When Filing Bankruptcy
The old adage that the only things certain in life are death and taxes holds true even if you are considering filing bankruptcy. That means the trustee will want to see you income tax returns. If you are subject to filing an income tax return and find yourself in a difficult financial situation, it is important to make sure your returns are current. Your income tax return is a true and accurate reflection of your income. It is a sworn statement by the taxpayer that this is how much they earned, how much they deducted, and that those deductions are legitimate. Often clients come in and have not filed their income tax returns for several years. You can retain an accountant or a tax professional and catch up on the missing tax returns. You can also talk to the tax professional about alleviating the tax burden if the IRS has filed a substitute return and has not taken advantage of all of your potential deductions. It is also important to know that if you fail to file your tax return for more than three years, you can forfeit any refund to which you may have been entitled.
Your income tax return is also an important tool in proving your financial position when it comes to debt settlement or even post judgement recovery. Again your tax return shows how much money you made and how much you can actually afford to pay. It is also critical to understand that just because the income tax return was not filed the taxes are not due. Further, if you file for an extension, it does not extend the time available to pay your taxes. It let’s the IRS know that you will be filing your income tax return later. The taxes that are due will be subject to any interest and penalties the IRS can apply.
If you find you owe more money and cannot afford to pay the taxes owed, it is not the end of the world. Contrary to popular myth, the IRS is not an ogre. They will work with you.
If you live in Stuart, Port St. Lucie, Jupiter, or anywhere along the treasure coast or the palm beaches and need and lawyer, give my office a call.
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