Filing For Bankruptcy And Taxes
How will my filing for bankruptcy last year effect my income tax filing this year?
My husband and I filed for Chapter 7 bankruptcy in March of last year. We were discharged in August of 08. We let everything go back to the banks–Our house, our 2 cars, everything. Now that it is income tax time this year, I am curious how the bankruptcy will play in our filing. We have filed our taxes from home using Turbo Tax for the past 4-5 years and love doing it that way. Should we go to a professional this year? I really want to do it from home, but don’t know if that would be the smart thing to do. Do the income tax forms ask about filing for a bankruptcy? How do you report the loss of a home due to bankruptcy? I am confused and need help. I think the answer I will get will not be one I want to hear. “GO TO A PROFESSIONAL” I am hoping you can advise me otherwise. Thanks.
btw…I live in KY
Whether you need to go to a professional depends upon your situation and how knowledgable you are about taxes. If you had business property, rental property, a capital loss carryforward from 2007 or you have received tax documents from your bankruptcy trustee, etc, then you should consult with a professional.
If your only income is wages and maybe some interest or dividends (and none of the above situations applies to you), then you report all your wages for the year and the other income you received during the year. Do not include any income that went to or expenses paid by the Bankruptcy trustee. Then calculate your tax return as normal.
If you do it yourself, it would be advisable to have your return checked by a professional familiar with bankruptcy tax situations who can tell you it looks good.
Richard K
Master Tax Advisor
Enrolled Agent
This advice is based upon my understanding of the tax law at the time it was written as it applies to the facts provided by you. See my profile for more information.
The No-Tax Disciples Strike Again!
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