Filing taxes late & getting refund from prior years?

[octoblonde]

I wondering if I should file taxes for past years that I was not required to.

My income was from no-fault insurance after a motor vehicle accident. I also received a settlement in 2007, which was my only income. Years later, I received a lump sum SSDI payment going back to '05,'06 & '07. I might possibly be due some refunds, since I had no tax liability and own a home, paid student loan interest and had a child in 2007. I know I'd have to spend the money before I file in 3 months.

Before I spend money for any prior year tax software, I'm wondering if it would be worth filing. I don't want to not do it and then have the Ch.7 Trustee say I have to file for those years & that the refund is part of the BK estate. Does anyone have any insight into this situation?

Thanks!

[daylate]

Just a few thoughts- because you are a cash basis taxpayer I'm pretty sure the only year that would be affected would be the year you actually received the lump sum. Although from just reading IRS Pub 915 it looks like you can refigure prior years taxes to see if some of it can be excluded. It is a bit complicated so you may want to red the iRS pub or get an accountant to help.

The insurance proceeds for the motor vehicle accident probably aren't taxable unless they were for punitive damages assessed as punishment to the other party..

Why would the trustee ask for that info anyway? They usually only want to see tax returns for last two years at most.

If you didn't work my guess is you wouldn't be eligible for any refunds anyway.

The ssdi may or not be taxable depending on how much you received, your filing status and other income you had. Possible this could require you to pay taxes plus penalties and interest for not filing when you should have.

You might want to run this by a CPA for complete advice depending on all the facts.