LIVELINES: BANKRUPTCY CALLS
What are your tax obligations when it comes to filing bankruptcy?
Although today is tax day and you have a few days left to file, what penalties can you face?
Bankruptcy Attorney Eron Epstein was our guest.
The tax obligations of the person filing a bankruptcy petition vary depending on whether you file a Chapter 7 or Chapter 13.
Unlike chapter 7, when filing a Chapter 13 bankruptcy petition, you do not create a separate taxable estate for federal tax purposes. You file the same federal income tax return (Form 1040) that was filed prior to the bankruptcy petition.
When filing a Chapter 7 bankruptcy petition, you create a separate taxable bankruptcy estate, consisting of property that belongs to you before the filing date, and is completely separate from you as an individual taxpayer. The trustee is responsible for preparing and filing the estate's tax returns (Form 1041) and paying its taxes. The individual debtor remains responsible for filing returns (Form 1040) and paying taxes on any income that does not belong to the estate.