Generally, a debtor must file their tax returns that are due after the bankruptcy petition has been filed. If this is not completed within 90 days from the petition date, the taxing authority can request the court to dismiss the bankruptcy case. In the case of a Chapter 7 bankruptcy, they can have the court convert it to a Chapter 13.
If the taxpayer is unable to file their tax returns within this 90 day window, they should request an extension to file on the merit of good reason. The taxpayer will only be granted an extension of time to file for a very good reason.
Chapter 13 Tax Returns
According to the bankruptcy Code for Chapter 13 bankruptcy, debtors must:
1. File all tax returns for the tax periods ending within 4 years of the debtor’s bankruptcy filing
2. File all returns before the first creditor meeting, or
3. Request the trustee hold the creditors meeting open for an additional 120 days, or until the day the returns are due according to the IRS automatic extension
In many cases, the trustee will require the debtor to submit copies of the tax returns as proof of the filing. In most cases, the taxpayer can request transcripts from the IRS of the filing of their returns by filing Form 4506-T and having them sent directly to the trustee.
The taxpayer also has the option of requesting that the IRS mail the transcripts to the current address on file. This will usually take between 10-15 days of the request for the proof of filing.
Chapter 11 Tax Returns
In the event of a taxpayer not filing their tax returns in regard to a Chapter 11 bankruptcy, the debtor may encounter one of three scenarios:
1. The Chapter 11 proceeding will be dismissed
2. The Chapter 11 proceeding will be converted to a Chapter 7 case
3. A Chapter 11 trustee will be appointed to the case