Filing for bankruptcy doesn’t relieve you of your obligation to file your tax return for the year. In fact, you’ll be responsible for filing both your federal and state income tax returns before, during, and after the bankruptcy, regardless of whether or not you have the ability to pay your tax bill. It’s important that you also try to file your return on time as unpaid income taxes that are filed in a timely manner and are more than three years old are dischargeable. If you file a tax return fraudulently or don’t file at all, your taxes won’t be discharged in a Chapter 7 bankruptcy. If you’re late on filing your return, you can use a Chapter 13 plan to give you up to five years to file and pay taxes not more than three years old. Income taxes more than three years old are usually eliminated in a Chapter 13 proceeding. Generally, if you know you’re going to have tax liability before you file bankruptcy, it’s recommended that you find out when your taxes were assessed by the Internal Revenue Service, when you filed tardy tax returns, and if there are any extensions you can utilize to file overdue returns. This information will help you determine how your taxes will be handled and what priority they’ll be given in the bankruptcy proceeding. If a trustee is assigned to oversee your case, he or she will most likely be responsible for preparing your tax returns during the bankruptcy. The responsibility, however, will shift back to you once the bankruptcy proceeding is over. In the event that you have no assets or income, the trustee can apply to the Internal Revenue Service to exempt you from filing your federal income taxes. Your state and local tax obligations may be treated differently and will be dependent on the bankruptcy rules of your particular state or municipality.
