Everyone’s taxes are different, and if you filed for bankruptcy recently, then you need to make sure you do everything correctly.
For the most part, you do not have to worry too much when tax season comes after filing for bankruptcy. With the assistance of a professional accountant, you will know precisely what paperwork to include in your forms.
File on time
One of the most basic things to remember is that you need to file your taxes on time if you have petitioned for bankruptcy. A missed deadline could cause the court to dismiss your petition.
Have your trustee file the right paperwork
When you file for Chapter 7 bankruptcy, the court appoints a trustee to oversee your estate. It is the responsibility of the trustee to pay back creditors with any assets not protected by the bankruptcy. Ultimately, you will need to submit a standard 1040 form. This will not change, so make sure you fill this out exactly the way you have done in the past. However, you want to make sure the trustee fills out Form 1041, which is for the bankruptcy estate.
Look at possible deductions
When you file for personal bankruptcy, you cannot deduct legal expenses. That means you cannot deduct your attorney fees. However, business bankruptcies can qualify for certain deductions.
File taxes before filing for bankruptcy
You may come to the conclusion that it would be best to file for bankruptcy around the same time you need to sort through your tax forms. Generally speaking, it is preferable to file your taxes before declaring bankruptcy. The exception to this rule is if you know you will receive a substantial refund. Trustees always ask what you did with your tax refund money, so you should plan to spend it on something productive and worthwhile.