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Tax Question Roundup

By Cathy Moran

 

soapboxNot long til tax returns are due.

Time for a roundup of tax issues I see from atop my soapbox.

I’ll point you to fuller discussions of tax topics.

Are Chapter 13 payments deductible?  

I’ve never seen a claim that the entire monthly payment is deductible.  In a case where all of the debts were business debts, it might be possible.  But distributions by the trustee on debts like taxes or mortgage interest that were  deductible outside of bankruptcy should be deductible.

Do I have to include amounts on 1099’s I got?  

Since the IRS got a copy of every 1099 that you got, you can’t ignore them.  But 1099’s don’t necessarily mean more tax.

  • 1099’s as a result of foreclosure
  • 1099’s for debts included in bankruptcy
  • insolvency as a defense to tax on forgiven debt

Should I request an extension if I can’t pay what I’ll owe?  

The law allows you to avoid penalties for late filing if you request an extension of time to file.  The interest clock on taxes you owe doesn’t stop, however.

  • Taxes for years without filed returns survive forever
  • Clock for time until taxes are dischargeable starts only when the extension runs out

Are property taxes a priority for payment when money’s tight?  

I can only speak authoritatively for California:  here, the property owner has no personal liability for the tax.

Property taxes are a charge on the property, however.  The county’s lien is senior to the mortgage lender’s lien.

Taxes have to be at least five years delinquent before the county will consider a sale of property for unpaid taxes.

And most likely, your mortgage lender will advance the money to pay property taxes rather than risk a tax sale.

Can I get rid of taxes in bankruptcy?  

I thought you’d never ask!  Yes, income taxes for which an honest return was filed and sufficient time has run (roughly three years from when the return was due) are dischargeable in bankruptcy.

The discharge of taxes has lots of twists and turns, so you need careful bankruptcy advice, but bankruptcy will eliminate the personal liability for income taxes.

More from the Soapbox

  • Long Silent Second Mortgages:  The Worrisome TruthLong Silent Second Mortgages: The Worrisome Truth
  • California Renter Protections From Eviction: How To QualifyCalifornia Renter Protections From Eviction: How To Qualify
  • The Trouble With Your Social SecurityThe Trouble With Your Social Security
  • Chapter 13 Fixes Tax TroubleChapter 13 Fixes Tax Trouble
  • What’s So Scary About Bankruptcy?What’s So Scary About Bankruptcy?

Filed Under: Taxes

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

Bankruptcy Basics

About The Soapbox

You’ve arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said “try”).

Here, I allow myself to tell stories and express strong opinions. We dig deeper into how to consider bankruptcy and navigate a bankruptcy case.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

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