Tax Issues In Bankruptcy

09 Jan IRS to Chapter 13 Debtors: File Your Returns by February 5!

We all know that individual tax returns are due on April 15 (or a day or two later if April 15 is on a weekend). But Congress inserted a little tax time craziness into sections 1308 and 1307 of the new and drastically unimproved Bankruptcy Code of 2005. Section 1308(a) states:

(a) Not later than the day before the date on which the meeting of the creditors is first scheduled to be held under section 341 (a), if the debtor was required to file a tax return under applicable nonbankruptcy law, the debtor shall file with appropriate tax authorities all tax returns for all taxable periods ending during the 4-year period ending on the date of the filing of the petition.

At first reading, this section appears to only be dealing with those returns the debtor "was required to file" prior to the 341 hearing or "First Meeting of Creditors." For example, if it's February 5th, 2012, and I'm a debtor in bankruptcy, it can't be said that I "was required" to file my 2011 return. After all, the IRS gives me until April 15.
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28 Dec Chapter 12 Farm Bankruptcy Case is Before the Supreme Court

Chapter 12 farm bankruptcy helps family farmers to keep their farms. It allows family farmers to reorganize their finances and operations.Chapter 12 was originally enacted by Congress in 1986, and was made permanent in 2005. It helps the farmer and the banker to sit down and work out alternatives for debt repayment. But according to Senator Charles Grassley, recent IRS actions are threatening family farmers’ ability to properly reorganize in Chapter 12. Grassley authored a provision which is supposed to allow farmers in Chapter 12 to sell some of their property without having to pay capital gains taxes to the IRS in full. The provision, enacted in 2005 as 11 USC 1222(a)(2)(A) was intended to make capital gains taxes into unsecured claims (often paid at only a percentage of the total) rather than priority claims (required to be paid in full). The US Supreme Court heard arguments on November 29th in the case of Hall v. United States. The IRS argued that capital gains taxes created by the sale of property during a farm bankruptcy proceeding are payable in full as an administrativeexpense under the Chapter 12 reorganization plan.
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19 Oct The Three Year Rule for Getting Rid of Income Taxes in Bankruptcy

Everyone knows that you can't discharge income taxes in bankruptcy. Right? No,not right at all. This misconception about bankruptcy law illustrates just why you shouldn't substitute cocktail party gossip for the advice of a good lawyer. Especially when the question involves discharging income taxes in a consumer bankruptcy case. Generally, income taxes are discharged in a chapter 7 or chapter 13 bankruptcy case when the tax is four years old or more. (For those readers who owe substantial income taxes and who are learning this here for the first time, kindly place your eyeballs back into their sockets and read on for some additional qualifications.)
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17 May Don’t Let The IRS Secret Lien Ruin Your Retirement!

If you owe federal tax and fail to pay, the IRS has a federal tax lien on all of your assets. The lien can be a secret and exists even if the IRS has failed to file a Notice of Federal Tax Lien in the public records. This secret lien can take your retirement funds to pay a tax debt even after the tax has been discharged in bankruptcy. Bankruptcy can discharge some types of tax liability. However, a properly recorded lien generally survives bankruptcy discharge. This is true for recorded tax liens as well as liens that are recorded voluntarily against property of the debtor in bankruptcy. The code specifically provides protection for assets of the bankruptcy estate that the debtor has claimed exempt unless the assets are encumbered by a properly recorded tax lien. However, to qualify for exemption, the property must have actually been part of the estate in the first place.
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