How to File Income Tax After Bankruptcy

There are several common misconceptions of both Chapter 7 (debt forgiveness) and Chapter 13 (debt restructuring) bankruptcy cases in the United States when it comes to income taxes. The first one is that taxes can be discharged in bankruptcy, but unless the debt is more than 4 years old, this is false. Another misconception is that any debt forgiven or restructured through bankruptcy is considered taxable income. Filing income tax after bankruptcy is not any different from filing before bankruptcy, but you may still owe hefty taxes to the Internal Revenue Service (IRS) and not get an expected refund.

Instructions

1. Contact the IRS by telephone or by visiting an in-person tax help center ran by the federal government to find out what remaining tax liability you have after your bankruptcy filing. You likely did this before bankruptcy, but since it can take 6 months to complete the case, your owed back taxes could have increased even more during this time.

2. Make a payment arrangement plan with the IRS for any owed back taxes. This can be a frightening experience, but if you fail to do so you will eventually be hit with a tax lien -- which would not be included in your completed bankruptcy case. This could lead to wage garnishments and seizure of any assets you might have accrued since your bankruptcy.

3. Fill out your tax forms for the current tax year as you normally would. You can obtain forms from your local IRS office and most post offices and libraries. You might also consider using IRS e-file to file your tax return online.

4. File your state income taxes as appropriate, remembering that the same bankruptcy rules typically apply to such taxes. If you owe the state money, be sure to also make a payment arrangement with your Department of Taxation. In many states, you cannot get benefits such as registering a car if you owe excessive back taxes. These are also subject to tax liens, which could drastically harm your credit and finances even further than your original bankruptcy case. Most states provide tax forms online, through city and town hall tax offices, the library, and sometimes the post office. A growing number of states also allow people to file taxes completely online.

Tips & Warnings

• Remember to always work out a payment plan for your federal and state back taxes, even if you can only pay very little.

• Do not attempt to disguise assets or income when filling out any tax form, whether or not you are in or out of bankruptcy. This is a federal crime punishable by imprisonment.

Resources

• Internal Revenue Service - Contact My Local Office
• IRS e-file