requirement to file past 4 year returns - chapter 7?

[bornfree2]

I stumbled across 11 U.S. Code § 1308 - Filing of prepetition tax returns . It seems to suggest that prior to the first 341 meeting, Debtor should have filed tax returns 4 year prior. First time I have become aware of this.

I did know that 7 days prior to first 341, Debtor needs to give trustee most recent tax year return.

1308 says:

(a)
Not later than the day before the date on which the meeting of the creditors is first scheduled to be held under section 341(a), if the debtor was required to file a tax return under applicable nonbankruptcy law, the debtor shall file with appropriate tax authorities all tax returns for all taxable periods ending during the 4-year period ending on the date of the filing of the petition.

Many during the pandemic or before it did not make any income. The underlined part ('if the debtor was requied to file....shall file') perhaps refers to those that simply were to broke to report anything thus not required to file.

Should Debtor go ahead and file past returns, or is it enough to craft a letter to trustee stating the facts of why the returns were not filed? Prudence here says go ahead and file them AND craft a letter stating why it was not filed and that it is being filed.

[justbroke]

These are standard items required to file bankruptcy. The one you speak about is related to the filing of tax returns. The bankruptcy code requires a debtor to have filed all tax returns which were due prior to filing.

Trustees will usually have a website and on their website have a list of specific items they require before the 341 meeting. These items typically include last 2 year's tax returns, last 90-days of bank statements, paystubs up to the filing date, and even copies of insurance policies (vehicle, homeowners, rent, and even life).

You will not receive a discharge unless the tax returns are filed. There's no way the bankruptcy estate can proceed without knowing the implication of taxes (priority versus general unsecured).

Also, if you are this late filing taxes, for years, then you will likely lose the ability to discharge taxes under the 3/2/240 rule.

[bornfree2]

yikes! thanks. 2 years is no problem. prior year 3,4 is the problem to fix. fortunately filing past taxes with zero taxable income is relatively simple. just a matter of making sure the returns speed their way through the millions of other ones.

thinking then of drafting a letter in preparation explaining situation, with transcripts of 4 years (even if they show 'no data'), copies of all 4 for trustee to review, and proof of filing the past ones. Thats really all the actions I can think of taking to show good faith effort to meet this requirement.

Also, if you are this late filing taxes, for years, then you will likely lose the ability to discharge taxes under the 3/240/2 rule.

What is this referring to? edit: seems to be explained here, here

from: Discharging Taxes in Bankruptcy - July 2010

The whole page is a very good read on this topic.

To be dischargeable, individual income tax liabilities must meet the following “mechanical” rules of 11 USC §§ 523(a)(1) and 507(a)(8):

• More than three years must have elapsed since the tax return generating the liability was due, including extensions. Various acts such as prior bankruptcies, collection due process (CDP) hearings, innocent spouse relief and tax assistance orders can extend the three-year time frame.
• The tax return must have been filed more than two years earlier than the bankruptcy petition (generally applicable to late-filed returns). Note, however, that IRS-prepared “substitute for returns” are not considered filed returns for this purpose, and thus a tax liability assessed from them would not be subject to discharge (IRC § 6020(b)). Therefore, it is almost always advisable for the client to file all delinquent returns and, if possible, let the mechanical time frames pass before the bankruptcy petition is filed.
• At least 240 days must have elapsed since the date of an IRS assessment (generally applicable to audit adjustments and amended returns). This time frame is extended by an OIC.

[bornfree2]

THIS IS JUST MY OPINION.I AM NOT A LAWYER OR ACCOUNTANT. THIS IS NOT LEGAL ADVICE. CONSULT QUALIFIED LEGAL/ACCOUNTING EXPERT

Further research on this topic of debtor not having filed prior year taxes before a bankruptcy petition...

I found some hits on RECAP and google.

• The code 11 U.S. Code § 1308 - Filing of prepetition tax returns deals with chapter 13. In that case it is required to file all 4 prior years.
• Not clear if the same requirement is for 7, but of course its safest insurance to file prior years before filing.
• For Chapter 7, 7 days prior to first 341, Debtor needs to give trustee most recent tax year return.

This is what a notice from IRS/state tax agency looks like for failure to file.

• https://www.courtlistener.com/docket...veira-sampaio/ - Chapter 13 case
• On RECAP many hits for "notice" "unfiled" "taxes"

Here a debtor 'fights back', and wins some / loose some rights to dischargeability of income tax debt from prior years

Lastly, there is a good form letter ("Form 57: Statement Explaining Debtor’s Failure to Provide Tax Return to Trustee or Creditors") in Vol 2 of the NCLC’s Consumer Bankruptcy Law and Practice . Remember you can find these titles at a good law library near you for free.

That letter in particular uses the requirements of IRS form 9452 Filing Assistance Program which outlines why a Debtor were not legally required to file taxes for that particular year. These forms go back from 2018 to prior. They have since modernized it with the interactive tax assistant which covers 2021, 2020, 2019.

Bottom line: avoid this headache by filing all taxes in prior years before filing for bankruptcy.

THIS IS JUST MY OPINION.I AM NOT A LAWYER OR ACCOUNTANT. THIS IS NOT LEGAL ADVICE. CONSULT QUALIFIED LEGAL/ACCOUNTING EXPERT

[Gixermeup]

These are standard items required to file bankruptcy. The one you speak about is related to the filing of tax returns. The bankruptcy code requires a debtor to have filed all tax returns which were due prior to filing.

Trustees will usually have a website and on their website have a list of specific items they require before the 341 meeting. These items typically include last 2 year's tax returns, last 90-days of bank statements, paystubs up to the filing date, and even copies of insurance policies (vehicle, homeowners, rent, and even life).

You will not receive a discharge unless the tax returns are filed. There's no way the bankruptcy estate can proceed without knowing the implication of taxes (priority versus general unsecured).

Also, if you are this late filing taxes, for years, then you will likely lose the ability to discharge taxes under the 3/2/240 rule.

How do you find your trustees website? I'm from NJ, I found my local bankruptcy court and found all the required forms but can't find anything about the trustee.

[bornfree2]

How do you find your trustees website? I'm from NJ, I found my local bankruptcy court and found all the required forms but can't find anything about the trustee.

ch7 - https://www.justice.gov/ust/eo/priva...cator/7.htm#NJ

ch 13 - https://www.justice.gov/ust/eo/private_trustee/locator/13.htm#NJ

That is a list of all trustees for New Jersey. You could find their website based on their emails. Or email them and ask. Not all have websites with procedures. My trustee had no information at all