Tax Return Filing Questions - need help please!

[nicole1969]

We are filing for Chp 7 in February. Due to this year's delay in tax forms for people filing using itemized deductions, Turbo Tax says we won't be able to actually submit the return to the IRS until Feb 15th or later (when the new forms are released by the IRS.) Question: Does your tax return need to be submitted to the IRS or just completed and not yet filed on the date you file for bankruptcy? Or does it even need to be completed at all by that bankruptcy date? NOTE: we are not worried about having the trustee take money from the refund because we owe a little.

Also, there is a chance that we might have to file an amended return in the future for 2010 taxes. We would not file this until well after the bankruptcy is complete. Does this cause any problems? The amended return might give us a small refund.

Thank you much!!!

[daylate]

I'm pretty sure you can file BK without actually having filed your taxes. If that weren't the case there would be minimal filings in January as w-2's aren't required to be sent until the end of the month.
Also I'm a bit curious as to why you might have to file an amended return. If something hasn't happened already and you are a cash basis taxpayer I would assume that whatever happens to cause the amended return should just be reflected on that years taxes. Unless you meant 2009 taxes that you filed in 2010.

[nicole1969]

Great, thank you daylate. The ammended return is a little complicated. We started a very small business earlier in the year with a friend. The business expenses will be shared between us. But the friend has not had time to look at any of it an won't until closer to the April 14th deadline. So basically, we really won't have our return fully done until a few months after we file. But I am pretty sure our attorney said that we would at least need to have the return 'done' but not filed by the bankruptcy date. I hear that the trustee will verbally ask us if we expect a return, but I wasn't sure if we actually need to provide a copy of our completed return when we file. If we don't need to do anything with the return prior to filing other than be able to answer the question if we expect a return, that would be the ideal situation for us.

[daylate]

I'm pretty sure you just have to be able to answer but I'm sure some other folks with more knowledge will chime in. My thought would be to "guesstimate" what the impact of the business will be and include that in your preliminary calculation of your taxes. From what you said it looks like you think it will generate a loss. If that leads to a refund then to not disclose it would seem disingenuous and might cause you problems down the line. I'm betting your friend has at least a feel as to whether or not the biz lost money and about how much.

[free2breathe]

If I remember right, the rule is that all tax returns "due at the time of filing" must be filed. 2010 isn't due until April 18 this year, so it shouldn't be a problem.

However, under Individuals Duty to Provide Documentation on uscourts site it says:

"(3) Tax Return. At least 7 days before the first date set for the meeting of creditors under § 341,
the debtor shall provide to the trustee a copy of the debtor’s federal income tax return for the most recent tax year ending immediately before the commencement of the case and for which a return was filed, including any attachments, or a transcript of the tax return, or provide a written statement that the documentation does not exist."

[free2breathe]

As an added footnote here, you could put in writing that the tax return for 2010 has not been prepared, because of the reason you stated above. The trustee will probably do nothing more than request that you provide him with a copy of the 2010 tax return as soon as you have completed it.

[nceguyfromne]

You don't have to file your tax return before filing your BK but the one disadvantage to not doing so is that the entire anticipated amount of any potential refund is going to become part of the BK estate. If you can exempt it then I suppose it makes no difference but if the cash limit in your state is low and you're cutting it close then you might just be forking some or all of it over to the trustee. If you can get and spend the money on reasonable, justifiable things (i.e. rent/mortgage, normal household expenses, the attorney and filing fees for your BK) before filing your case then it's not only less money for the trustee to possibly take but it's also paying your bills and helping you get off to a stronger post-BK start. Obviously, you wouldn't want to use it to buy luxury items or make preference payments.

[free2breathe]

Turning over the refund isn't an issue for the OP, as they say they will actually owe a little ;)

Unless, of course, the amended tax return does produce a small refund....again, so much depends on the district and the trustee. As the saying goes, "Your mileage may vary"

[hughewil]

we didn't doour return yet and filed for chapter 7 yesterday. Out attorney said to go ahead and file our return and bring it to the 341. We didn't use any of our wildcard however and he said that we can exempt that much of the refund so 2300 which will be most of what comes back, so the trusrtee will get at most a couple of hundred dollars.

[nicole1969]

Thank you all, this is VERY helpful. We met with attorney today and he said that we do not need to file or have the tax refund completed by the 341 meeting, we just need to know when we file what the "anticipated refund" would be. Since we don't owe, or owe only a few hundred, we will just file when the forms are released.