This spring, millions of Americans will file tax returns with the Internal Revenue Service (IRS). And while many will look forward to the prospect of a tax return, others are sure to view the filing process with a sense of disdain. For those filing for bankruptcy, however, retaining a current tax record is essential due to the role income taxes play in bankruptcy proceedings. Below, a bankruptcy attorney from Greene Law PC in Farmington, CT, highlights the importance of tax returns in bankruptcies. 

Non-Dischargeable Debts

Not all debt is created equal. Whereas some debt can be racked up through frivolous spending, other debts are often related to medical expenses, mortgage loans, education, and taxes. Filing for bankruptcy provides debtors the ability to discharge many of these debts and obtain a fresh financial start. However, federally-backed student loans and certain tax debts—such as a federal tax lien—are not dischargeable under the U.S. Bankruptcy Code.  

Bankruptcy courts inspect tax returns thoroughly to ensure transparency. With this in mind, debtors filing for bankruptcy are highly encouraged to retain a current tax record, regardless of tax debt, to avoid unanticipated delays, adverse tax consequences, and personal liability.   

Accuracy Is Paramount

The accuracy of your tax return is paramount to the success of your bankruptcy case. If you hope to receive debt relief from bankruptcy, your case must be filed in good faith and, thus, void of misrepresentation or false statements to a taxing authority. Although it is possible to have tax debts discharged through a bankruptcy filing, the risk of assessment or audit by the IRS due to an unfiled or misrepresented tax filing may lead to increased tax liabilities.

If you require the aid of a seasoned bankruptcy attorney in Farmington, CT, Greene Law PC is the law firm to call. Focusing on Chapter 7 and 13 bankruptcy cases, their attorneys have you covered for the personalized, professional, high-quality legal counsel you need to obtain the fresh financial start you’ve been dreaming of. Free consultations are available. Contact the practice online or call (860) 676-1336 to speak with a bankruptcy attorney directly.