Anyone filing a chapter 13 bankruptcy case without filing their outstanding tax returns is at risk of having their bankruptcy case dismissed a few weeks into their case. Theron Morrison and the attorneys at the Morrison Law Group advise any prospective chapter 13 bankruptcy debtor, and for that matter, any prospective bankruptcy debtor, to file all outstanding tax returns with the IRS before filing any bankruptcy case.
Bankruptcy debtors must disclose their total income for the year of the bankruptcy filing up to the petition date, in addition to income for the two years before the year that the bankruptcy case was filed. Bankruptcy trustees for all chapters of bankruptcy cases must verify debtors’ income and do so by reviewing their tax returns. This is necessary in all bankruptcy cases, Chapter 7s, 11s, and 13s.
- 521 of the Bankruptcy Code, regarding the automatic dismissal of a case, may apply after 45 days have passed since the commencement of the bankruptcy case. At this time, the assigned bankruptcy trustee must determine whether the debtor has met all filing requirements required by § 521. If not, the court may dismiss a case under a court’s local rules and procedures earlier than the completion of the 45 days.
- 521(f) of the Bankruptcy Code, also contains language that, certain interested parties such as the court, the trustee, or any party in interest in a case under chapter 7, 11, or 13, may make requests of the debtor. Such requests require the debtor to file with the court at the same time with the return filed with the taxing authority, a copy of each required federal income tax return for each tax year that ended while the bankruptcy case is still pending. To put it simply, for every year debtors are currently in bankruptcy, they must file a copy of their tax return for that calendar year.
At the same time, such documents are filed with the appropriate taxing authority, debtors must file each required federal income tax return that had not been filed with the taxing authority as of the date of the commencement of the case, and that was subsequently filed for any tax year of the debtor ending in the three-year period during the year on which the case commenced.
In this case, if a tax return due in one of the three years before the petition date had not been filed as of the petition date and then subsequently filed with the IRS or Utah’s taxing authority while the bankruptcy case is still pending, debtors must file a copy or transcript with the bankruptcy court.
The debtor must also file a copy of any amendment to any federal income tax return or transcript that was filed with the bankruptcy court. It is permissible that a debtor chooses to file a transcript of a tax return instead of a copy of the return.
Talk to the Morrison Law Group about your Chapter 7 or Chapter 13 bankruptcy options. Call 801.456.9933 today to schedule a FREE consultation. We are Utah’s only statewide bankruptcy law firm and have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.