We talk a lot about taxes here on the Soapbox. That may seem a strange thing for a bankruptcy law firm to highlight.
But it’s not strange when you realize that taxes are the cause of many of our clients’ financial problems.
Filing date is barreling down on us.
So, here’s a sampler of how we see tax issues, along with tips to stay out of tax trouble.
Taxes remain collectible forever if you don’t file a return. File the return and you start the clock ticking on the collection statute of limitations. Discharge of taxes in bankruptcy is only possible when the returns are filed and a couple of years have passed.
If you are worried about what you owe for last tax year, you’re probably in trouble for the current year, too. Unless you’ve readjusted your withholding, you’re mired in a cycle of tax debt. Figure out how much you’re short for the return coming due, and increase your withholding over the next six months so you’re even come next tax year.
Uncle Sam wants you to pay tax on money you never saw if your debt was forgiven during the tax year. You have a 1099 that says so. Only the tax form isn’t conclusive. Find out when you can exclude that phantom income from your return.
Most of the entities that issue tax forms for cancellation of debt have no stake in the outcome. They have a legal obligation and they spit out a piece of paper to meet that obligation. Here’s what to do if the 1099 is wrong.
Chapter 13 often pay expenses that are deductible on your tax return, but you get no 1098 showing you paid. We have a guide for flushing out the deductible expenses from the trustee’s records so you can claim every deduction you’re entitled to.
The self employed and gigsters don’t have withholding from their paychecks. They’re expected to estimate their current year taxes and pay every three months. And there lies the path to tax trouble. Stop making quarterly payments: we have a better idea.