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.