Filing tax returns after bankruptcy, question for the experts.

[EandGWZ]

Let me apologize in advance if this has been asked and/or answered before.

I'm confused. Let's say you received a no asset discharge in the beginning of 2013.

Should this person anticipate having to pay taxes (not this year but next year) on the amount that was discharged?

If this person files a tax return, would any return be subjected to collection by the trustee?

My guess is that the answer to both questions is no but I am confused with people getting 1099's etc.

Thank you in advance.

[LadyInTheRed]

Debts discharged in bankruptcy are not taxable income.

If this person files a tax return, would any return be subjected to collection by the trustee?

Do you mean will your 2012 tax refund be subject to collection by the trustee? It depends. If you filed Chap 7 in late 2012 or early 2013, your 2012 refund is an asset that should be listed on your petition unless you receive it and spend it before filing BK. If you can exempt it, you can keep it. If you can't exempt it, the trustee can take it. This is true regardless of when you file your 2012 return.

[EandGWZ]

Debts discharged in bankruptcy are not taxable income.



Do you mean will your 2012 tax refund be subject to collection by the trustee? It depends. If you filed Chap 7 in late 2012 or early 2013, your 2012 refund is an asset that should be listed on your petition unless you receive it and spend it before filing BK. If you can exempt it, you can keep it. If you can't exempt it, the trustee can take it. This is true regardless of when you file your 2012 return.

Thank you. Filed 9/20, D/C 1/15. I could get a sizable return, my question is can that be recalled by the trustee like an inheritance would? If so, would waiting until the end of March to file be prudent (180 plus days)?

[EandGWZ]

And the second part of my question is do dismissed debt and forgiven debt get treated the same way tax wise, that is, should I anticipate paying a lot of money for tax year 2013? Edit: saw your response, thank you

[LadyInTheRed]

Thank you. Filed 9/20, D/C 1/15. I could get a sizable return, my question is can that be recalled by the trustee like an inheritance would? If so, would waiting until the end of March to file be prudent (180 plus days)?

No, it's not like an inheritance. As of 9/20, the amount withheld from your paychecks exceeded your actual tax liability. That overwithheld amount is an asset that needs to be exempted or can be taken by the trustee. When you file your tax return is irrelevant. If your case is still opened and your trustee has not indicated that your case is a no-asset case, you may have to give up the refund. Since you filed in Sept, the trustee can probably get only 3/4 of the refund because the other 1/4 was withheld after you filed BK.

[EandGWZ]

No, it's not like an inheritance. As of 9/20, the amount withheld from your paychecks exceeded your actual tax liability. That overwithheld amount is an asset that needs to be exempted or can be taken by the trustee. When you file your tax return is irrelevant. If your case is still opened and your trustee has not indicated that your case is a no-asset case, you may have to give up the refund. Since you filed in Sept, the trustee can probably get only 3/4 of the refund because the other 1/4 was withheld after you filed BK.

Thanks for the information. I'm going to have to do a bit more research because I've been unemployed since April, I was unemployed when I filed and throughout the process.

[tobee43]

if you filed a chapter 7 and the trustee closed your case they the bk court is not awaiting anything from your upcoming tax return.

what you see on this site are people discussing 1099A's and 1099C's one is usually for a house mortgage and one is usually from a written off bank credit card debt or similar.

when these 1099s are issued and one has filed bankruptcy, any amount the creditor is claiming is really their loss. that way they are also notifying the irs what they have written off as well as if you did receive one you just attach a form 982 to your return and it will indicate your insolvency, and or bankruptcy. there are no tax ramifications.

if you bk is closed and you rec'd both signed orders from the bk court. 1. being the discharge and 2. the no distribution of assets (the closing of your case). your tax return is yours to keep.

[EandGWZ]

if you filed a chapter 7 and the trustee closed your case they the bk court is not awaiting anything from your upcoming tax return.

what you see on this site are people discussing 1099A's and 1099C's one is usually for a house mortgage and one is usually from a written off bank credit card debt or similar.

when these 1099s are issued and one has filed bankruptcy, any amount the creditor is claiming is really their loss. that way they are also notifying the irs what they have written off as well as if you did receive one you just attach a form 982 to your return and it will indicate your insolvency, and or bankruptcy. there are no tax ramifications.

if you bk is closed and you rec'd both signed orders from the bk court. 1. being the discharge and 2. the no distribution of assets (the closing of your case). your tax return is yours to keep.

Thank you for the help. You can imagine the anxiety I was feeling when it occurred to me that in addition to dealing with all the credit issues related from a bankruptcy decision, I may have to also pay taxes on that money.

[tobee43]

it scary, i know.

especially with taxes! for a few years the banks were not issuing many 1099A or 1099C.

if will depend on how your accountant would like to handle it if you have rec'd 1099A which has the boxed check that you are liable for any loss. most times nothing has to be done, while some accountants still attach the form 982. on the other hand and i wanted to clarify this many times when you receive the 1099c you must attach the form unless the account was discharged in a bk. (although, i have seen it both ways).

all i can say is this...if it were me whether it was a 1099A, C, D S, G, L or P.....i would send in the 982! LOL!

once again, it's just the bank claiming their loss to the irs. you will be fine

[LadyInTheRed]

what you see on this site are people discussing 1099A's and 1099C's one is usually for a house mortgage and one is usually from a written off bank credit card debt or similar.

Let's be clear on the differences between a 1099-A and 1099-C.

Form 1099-A, called "Acquisition or Abandonment of Secured Property". It is used when a secured creditor forecloses on the property or releases a lien. A credit card company would not use a form 1099-A because there is no secured property involved (except maybe for cards like Best Buy that are secured by purchases, if they actually collect the property). Form 1099-C, called "Cancellation of Debt" is what is used to report forgiven or canceled debt. Both mortgage companies and credit card companies use form 1099C when appropriate. When there is a foreclosure, but the creditor does not forgive debt, they only have to issue a 1099-A. If they foreclose and cancel the debt in the same year, they only have to issue a 1099C. If they foreclose and cancel the debt in different years, they will issue a 1099-A in the year they foreclose and a 1099-C in the year they cancel the debt. If the debt was discharged in BK, a 1099C is not required, at least not for consumer debt. So, somebody who filed BK is most likely to get a 1099A for their mortgage, but may also get a 1099C.

[LadyInTheRed]

If this person files a tax return, would any return be subjected to collection by the trustee?

if you bk is closed and you rec'd both signed orders from the bk court. 1. being the discharge and 2. the no distribution of assets (the closing of your case). your tax return is yours to keep.

To everyone who is reading this: can we PLEASE use the correct terminology!!!!!

A tax return is the the document you file every year to report your income and deductions and to calculate whether you owe tax or are due a refund.

A tax refund is what the IRS pays to you if you overpaid your tax.

The distinction really does matter. "Do I need to turn over my tax return?" and "Do I need to turn over my tax refund" are two different questions. All debtors must submit a copy of their tax returns for the most recent tax year to their trustee prior to the 341. Some Chap 13 debtors need to continue to send their annual returns to the trustee. Whether a debtor has to turn over a tax refund depends on the facts of the case.

Thank you for letting me get that off my chest!

[EandGWZ]

Appreciate the distinction Lady, all my debts were discharged during Chapter 7...when I file next year's tax return I do not anticipate having to return any refund, if any, should I receive one

[tobee43]

Let's be clear on the differences between a 1099-A and 1099-C.

Form 1099-A, called "Acquisition or Abandonment of Secured Property". It is used when a secured creditor forecloses on the property or releases a lien. A credit card company would not use a form 1099-A because there is no secured property involved (except maybe for cards like Best Buy that are secured by purchases, if they actually collect the property). Form 1099-C, called "Cancellation of Debt" is what is used to report forgiven or canceled debt. Both mortgage companies and credit card companies use form 1099C when appropriate. When there is a foreclosure, but the creditor does not forgive debt, they only have to issue a 1099-A. If they foreclose and cancel the debt in the same year, they only have to issue a 1099C. If they foreclose and cancel the debt in different years, they will issue a 1099-A in the year they foreclose and a 1099-C in the year they cancel the debt. If the debt was discharged in BK, a 1099C is not required, at least not for consumer debt. So, somebody who filed BK is most likely to get a 1099A for their mortgage, but may also get a 1099C.

yes i want this very clear, its' possible to get BOTH on a single piece of property as i have stated previously and it is essential the correct information is related about this subject as people are very confused about their significance.

again i will stress people might receive multiple Forms 1099-A (one from each lender) for a single property. people might also receive Form 1099-C instead of Form 1099-A if the lender both foreclosed on the property and canceled any mortgage debt for which the borrower was personally liable.

while i may not personally be a tax "expert", working with tax issues just has been something i have been involved with for 30 plus years, i have done and dealt with thousands of returns, including 1099s most have never heard of or know about, nor would they.

of late the 1099 A's and C's are many times issued incorrectly to begin with from the issuing companies. until one actually works with these issues it must be stressed that looking the subject matter on google or the internet may cause further confusion for many.

get it straight from the horses mouth go directly to your tax accountant or professional, they have the latest on the way these 1099s are being handled. (many will not even attach a 982 by the way ).

[tobee43]

REFUND.....AFTER you do your RETURN...if you get one...and i meant return, just should have continued if your return resulted in a refund, just for more confusion.