This site often focuses on taxes, not because we are tax professionals, but because tax troubles are one of the prime reasons people file bankruptcy. And we are expert at bankruptcy issues.
2017 tax filing extension runs out October 16
So we think a lot about staying out of tax trouble, claiming all the tax deductions you are entitled to, and using bankruptcy to escape from taxes you can never really pay.
Let’s tour our treasurehouse of tax tidbits.
Unfiled taxes are a life sentence Even huge tax bills are dischargeable in bankruptcy long before the IRS statute of limitations, but only if you file an honest return. No return, no end to your tax liability.
Cut out the quarterly tax payments If your checkbook isn’t up to the number at the bottom line of your tax return, consider ditching the quarterly estimated tax deposits in favor of a monthly payment. Nothing says you can’t pay tax estimates at the end of every month, just like your other bills.
What you must tell your accountant Debt that is forgiven is treated as taxable income, unless it was discharged in bankruptcy. If you don’t tell your tax preparer that you filed bankruptcy, your tax bill goes way up.
The time must be right to discharge taxes The “three year rule” for wiping out taxes starts counting at a counter intuitive point. File too soon and you blow the opportunity to make the tax non collectible.
Find deductions in your Chapter 13 payments If your Chapter 13 plan is getting you current on mortgage payments or paying business debts, you may have additional deductible expenses. And no one sends you a tax form acknowledging the payment. It’s up to you.
The day after tax day for the self employed Quarterly tax estimates, filing extensions, and small businesses make for a tax trap for those looking for certainty. My formula for guesstimating the current year liability, so you don’t get caught short.
Protect your refund from bankruptcy trustee If bankruptcy is in your future, make a plan to keep your tax refund. Otherwise, your creditors may get to spend the refund.