If you are considering filing for Texas bankruptcy there are a few things you should know about how it could affect or interact with your taxes. For most people, there won’t be any complications with their taxes, but it is important to understand the three main tax issues in bankruptcy.
In order to file for bankruptcy you will need a copy of your most recent tax returns, typically dating back two to five years. You will also need to be current on your tax filing, meaning you will need to have a tax return on file with the IRS in order to be eligible to file for bankruptcy. If your taxes are not up to date your Texas bankruptcy lawyer can help you file your past returns to get caught up so you can be eligible to file.
If you are expecting a tax refund around the time of your bankruptcy filing it could be considered part of the bankruptcy estate. Receiving a tax refund prior to your filing will be considered income on your bankruptcy petition and, therefore, be considered part of your bankruptcy estate. Receiving a tax refund during an active bankruptcy estate may also be considered part of your estate, depending on which type of bankruptcy chapter you file under and the determinations of the court. Your Texas bankruptcy lawyer can help you manage your tax refund before or during your bankruptcy case.
If you owe the IRS money your tax debts may be eligible for a discharge in bankruptcy. The rules for including a tax debt in your bankruptcy case are highly specific and some people find their debts ineligible for bankruptcy. However, there are other ways to resolve your tax debt problems. Discuss ways to manage your tax debts with your Texas bankruptcy lawyer to find out how to get back in the good graces of the IRS.