Tips for Dealing with Unfiled Tax Returns
Bankruptcy clients in Clark and Washington’s Knoxville office sometimes acknowledge that they did not file tax returns with the IRS and/or Tennessee last year, or for one or more years previously. Sometimes there are unfiled tax returns due to other states as well. This is a problem for two reasons: first, unfiled tax returns means that there may be unknown liability. As your bankruptcy law firm, we need to know exactly what you owe. Ignoring possible tax liability is never a good idea. Since you have made the sensible decision to deal with your debt, you should deal with everything you owe, including your tax debt.
Secondly, the court personnel in bankruptcy are likely to ask for copies of recent tax returns. If we cannot produce last year’s tax return (and possibly tax returns from previous years), your case will come to a grinding halt, and may even be dismissed.
Chapter 13, in particular, cannot go forward with unknown tax debt, since there is no way to calculate a five year plan if we do not have a full picture of your liability.
We could go on and on about why you need to be current with tax returns from previous years, but you most likely get the idea - personal bankruptcy and unfiled tax returns do not mix well together.
Solutions to the Unfiled Tax Return Problem
Fortunately, there are solutions to the problem of unfiled tax returns and/or unexpected tax liability and penalties. The IRS and Tennessee Department of Revenue can provide much of the needed information for you or a tax adviser to prepare returns for prior years. Remember, your employers file copies of your W-2’s and 1099’s to the taxing authorities - this information is available if you ask for it. Here is a link to the IRS web site that explains how to request this information and which form to use.
We often suggest that our clients seek help from their accountants or tax preparers, or from non-attorney tax specialists known as “enrolled agents.” Enrolled Agents are licensed by the IRS to represent taxpayers, and are equipped to handle tax problems at a much lower cost than a tax attorney. Here is a link to the Tennessee Society of Enrolled Agents.
If you have a tax problem, we suggest that you seek guidance from an Enrolled Agent or even a tax lawyer. If you simply need to get past due returns filed, you can get copies of blank tax forms from previous years for free online.
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