#1 Tax Tip

The best thing you can do if you have a tax issue, haven’t filed your taxes and are looking at filing bankruptcy, is to file those taxes.

If you are going to get a refund, your bankruptcy attorney needs to know how much you’re going to get so that he/she can plan for it. If you are getting a large refund, your attorney will determine, based on your financial situation, if it is exempt. If it isn’t, your attorney can figure how you can protect the refunds from being taken by the bankruptcy trustee.

If you do owe taxes, not filing them isn’t going to make them go away. Unfilled taxes still need to be dealt with, especially in Chapter 13 bankruptcies. If the taxes aren’t filed, your attorney won’t be able to make an accurate plan payment prediction. The substitutes for those tax returns that the IRS will file on your behalf will not allow any deductions. So you are always better off filing the returns yourself.

The other major factor is that unfiled taxes can not be discharged in bankruptcy. The general rule is that the taxes must be at least 3 years old to be discharged. But if you haven’t filed the taxes, they can’t be discharged.

So get them filed, you have 12 days. Which reminds me, I better call the accountant.

See what Bret Nason, Wisconson bankruptcy attorney has to say about this.

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