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If you file bankruptcy do you owe income tax on the amount of debts that were discharged?
Wiki User
∙ 8y ago
This is an intriguing question considering that the IRS does consider forgiven debt to be income normally. However, I have never seen the IRS pursue any of my clients for income taxes due to forgiven debt in bankruptcy. I stay as far away from the Tax Code as possible, though the answer may lie in there.Please note that nothing in this posting or in any other posting constitutes legal advice; this is simply my understanding of the facts, which I do not warrant, and I am not suggesting any course of action or inaction to any person.
Wiki User
∙ 8y ago
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Can you put 4 year old income taxes in a bankruptcy?
Federal income taxes due in an amount certain 3 years or more before the bankruptcy filing date can be discharged along with other dischargeable debts. You cannot just file to discharge the taxes, unless you have no other unsecured debt.
Are bankruptcy payments tax deductible?
Absolutely not. Bankruptcy payments are repayments for debts that you incurred in the past and did not pay. There is no circumstances where these could be deductible on your income taxes.
Can you file income tax on your bankruptcy?
State Income Tax Claims, Federal Tax Claims, and Real Estate Taxes must be included in a bankruptcy filing. Income tax claims that are less than three years old will usually be consolidated with other debts and paid over three to five years in a Chapter 13. Depending upon income and assets, income tax claims for returns that were filed more than three years before the bankruptcy can sometimes be reduced substantially in a Chapter 13 and eliminated completely in a Chapter 7.The discharge of the debt in a bankruptcy, can actually cause taxable income for the year it is discharged if not handled proerly. You will get a 1099-C for most matters concering it.
Is bad debts a personal account or nominal account?
Bad debts accounts is a nominal account shown in income statement and use to reduce the accounts receivable amount.
What if any are the tax inplications of debt discharged in a chapter 7 bankruptcy?
Chapter 7: This chapter of bankruptcy law provides for a full liquidation of an entity's non-exempt property to satisfy creditors, and discharges all dischargeable debts This is a legal process under Federal statutes that provides for rehabilitation of a debtor through the discharge of certain debts or through a debt repayment plan over a certain period of time. Creditors cannot contact the debtor during the bankruptcy. They must wait until it is fully discharged. There are three chapters of bankruptcy == == == == I can't give a definitive answer, but I can relate what I have seen. I suppose to get a definitive answer one would need to look at the Tax Code, and I stay as far away from that as possible. However, I have never had a client come back and say they had any negative tax implications as a result of discharged debt in bankruptcy. I know the IRS can normally pursue forgiven debt as income, but for some reason (either because the Tax Code doesn't permit them to or because they simply opt not to) the IRS has never pursued any of my clients for forgiven (discharged) debt in bankruptcy to my knowledge. I have had a couple of situations where mortgage companies sent tax statements to clients who surrendered real estate in bankruptcy, but so far we have managed to get those resolved without any negative tax consequences. Please note that nothing in this posting or in any other posting constitutes legal advice; this is simply my understanding of the facts, which I do not warrant, and I am not suggesting any course of action or inaction to any person. While cancelled debt is typically includible under the Internal Revenue Code as gross income, there are certain exceptions: 1. Debt that is cancelled through a bankruptcy is NOT taxable as income, 2. Debt cancelled when you are insolvent is NOT taxable as income to the extent of your insolvency. Therefore, there are no tax implications and it does not have to be reported on the tax return. The creditors will send you a 1099-C for cancellation of debt, but they should also check the "bankruptcy" box. Make sure they do this. :)
What are tax implications of debt discharged in a chapter THIRTEEN bankruptcy?
Unless it is a tax debt, none. Discharged debts are not income to the debtor.
How do you know if your bankruptcy is discharged on your credit report?
Bankruptcy does not get discharged. Debts are discharged. The bankruptcy will remain on your credit report for 10 years from the date of filing. The debts that were discharged can remain for 7 years from the date of discharge, showing a zero balance and that they were discharged in bankruptcy.
Can you include IRS debts if you file bankruptcy in the state of IL?
Yes. They must be included. All debts and all assets must be included. IRS income tax debts can only be discharged, however, if the amount of tax due was determined 3 years prior to filing the bankruptcy.
Is bankruptcy discharged debt considered taxable income?
No, discharge of debts through bankruptcy do not create taxable earned income. However, you can have Capital Gains or Losses if any real-estate was disposed in that bankruptcy.
Can discharged items that were included in a bankruptcy be listed as discharged in bankruptcy on your credit report?
Yes, discharged debts are generally noted as "included in bankruptcy" on a CR.
What does it mean for a bankruptcy to be discharged?
You may be referring to the discharge of debts in bankruptcy. Not all debts can be discharged. Most discharged debts are partially discharged in Chapter 11 and Chapter 13 actions. Debts or the portions thereof that are discharged no longer exist at law and creditors no longer can attempt collection. It is a "fresh start". You attorney can advise you as to which debts are likely to be discharged, which ones reorganized, and which debts will likely not be discharged.
Can a spouse be reimbursed for debts that were discharged in bankruptcy as part of the dissolution of marriage terms?
Not if the debts were actually discharged in the bankruptcy. In regards to the cost of the bankruptcy if the couple were still legally married then that too is not recoverable.
Can priority debts be included in bankruptcy?
You don't have a choice, ALL debts must be included in your bankruptcy petition. Oh, also, priority debts cant be discharged in a bankruptcy.
Can an individual still get debts discharged under the new bankruptcy laws?
The act also continues to permit debtors to have their debts discharged, after compliance with the statute, and to possess a not-insignificant amount of assets upon termination of the proceeding.
Can you put 4 year old income taxes in a bankruptcy?
Federal income taxes due in an amount certain 3 years or more before the bankruptcy filing date can be discharged along with other dischargeable debts. You cannot just file to discharge the taxes, unless you have no other unsecured debt.
I had traffic tickets from 7 yrs ago that were sent to collections C O of the court I filed for Chapter 7 Bankruptcy those debts were discharged under the bankruptcy do I still owe the debts?
If tickets were discharged after filing for bankruptcy then someone would not owe on these debts.
If your bankruptcy has been discharged but your house is still in your name do you still have to pay back taxes?
A bankruptcy is not discharged. Debts are discharged. Real estate taxes are a lien on the real estate and would not usually be discharged. Talk to your bankruptcy layer.
