How to File Taxes After a Chapter 11
After a Chapter 11 bankruptcy, it is important to file your taxes on time. Failure to file your taxes or apply for an extension could put your bankruptcy judgment in jeopardy. Your bankruptcy attorney or the IRS can help you understand your tax obligations during the bankruptcy period.
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Instructions
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Consider ending your tax year. When you file Chapter 11 bankruptcy, you are entitled to end your tax year before your bankruptcy case begins. If you elect to end your tax year early, your tax period for that year ends the day before your bankruptcy case begins, and your new tax year starts on the day of the case. If you owe taxes, ending your tax year early allows you to use that tax liability as a claim against your estate in your bankruptcy case. You must file a 1040 form on the day before your bankruptcy case starts to end your tax year. If you do not do this, then your tax year remains the same, and your tax liability cannot be claimed against your bankruptcy estate.
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Understand your bankruptcy estate. After you file a Chapter 11, the courts will create a "bankruptcy estate" that is considered a separate entity from you personally. In Chapter 11 bankruptcies, you will normally be the trustee of the estate as a "debtor in possession." This estate includes any property owned by you before you filed bankruptcy that the court determines is eligible to be part of your bankruptcy agreement. Knowing what is included in this separate entity, and what your assets are personally will be important when you file your tax returns.
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File your returns. You must file a 1040 form for yourself, and the trustee of the bankruptcy estate must file a 1041 form for the estate. In Chapter 11 bankruptcy, the filer is almost always the trustee, but if there is a separate trustee in your case, they will need to file the 1041 form for you. If you did not elect to end your tax year early, your tax filings are due on the normal April 15 date. If you did end your year early, these returns are due a date specified during your bankruptcy case. If you need more time, be sure to contact the IRS and apply for an extension.
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Tips & Warnings
Seek help when you need it. Call the IRS, get your bankruptcy attorney involved, or hire a tax specialist if necessary to help you navigate the post bankruptcy filing process.
If you do not file your returns by the deadline, your bankruptcy judgment could be thrown out, so always file at the appropriate time.
