Posted on: 28th Mar, 2007 10:42 am
can i elect to end my tax year before filing bankruptcy? and how to proceed?
Hi Shiery,
You can elect to end your tax year on the day before filing bankruptcy. In that case your tax year will get divided into two short tax years each having months lesser than 12.
The first of these short years ends on the day before the bankruptcy filing date & the 2nd year begins on the date you file bankruptcy, ending on the date tax year normally ends. After this choice you will not be able to change it.
If there is any income tax due for the 1st short tax year then it becomes one of the allowable claims against the bankruptcy estate which will be created. But let me add that if such tax dues are not paid in the bankruptcy proceedings then it is not canceled due to bankruptcy. It can still be collected from you as an individual.
David
You can elect to end your tax year on the day before filing bankruptcy. In that case your tax year will get divided into two short tax years each having months lesser than 12.
The first of these short years ends on the day before the bankruptcy filing date & the 2nd year begins on the date you file bankruptcy, ending on the date tax year normally ends. After this choice you will not be able to change it.
If there is any income tax due for the 1st short tax year then it becomes one of the allowable claims against the bankruptcy estate which will be created. But let me add that if such tax dues are not paid in the bankruptcy proceedings then it is not canceled due to bankruptcy. It can still be collected from you as an individual.
David
To end your tax year before the filing date, you will have to file a return on Form 1040 for the 1st short tax year on or before 15th of the 4th month after the 1st tax year ends.
Let me give one example to make it clear. If you file bankruptcy petition on August 11, to have a timely filed election of ending the tax year, Form 1040 should be filed by December 15 for the period January 1 to August 10.
Let me give one example to make it clear. If you file bankruptcy petition on August 11, to have a timely filed election of ending the tax year, Form 1040 should be filed by December 15 for the period January 1 to August 10.
Some more details for you Shiery.
You should write "Section 1398 Election" on top of the return to avoid delays in processing of the return. You can also make such election by attaching a statement to an application for extension of time for filing your returns. This statement should state that you have elected to close your tax year on the day before filing bankruptcy under Section 1398(d)(2).
You should write "Section 1398 Election" on top of the return to avoid delays in processing of the return. You can also make such election by attaching a statement to an application for extension of time for filing your returns. This statement should state that you have elected to close your tax year on the day before filing bankruptcy under Section 1398(d)(2).