Catch-up contributions for IRC section 401(k) participants whose employer previously filed for bankruptcy.(p1)
Under the Pension Protection Act of 2006, P.L. 109-280, if you participated in an IRC section 401(k) plan and the employer who maintained the plan filed for bankruptcy in an earlier year, you may be able to contribute up to $7,000 to your traditional or Roth IRA. See Publication 590, Individual Retirement Arrangements (IRAs), for details.taxmap/pubs/p908-000.htm#en_us_publink1000137301
The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005.(p1)
On April 20, 2005, BAPCPA became law. However, most of BAPCPA's provisions became effective 180 days after the bill was signed into law, or October 17, 2005. The BAPCPA provides that:
- Debtors filing under chapters 7, 11, 12, and 13 of the Bankruptcy Code must file all applicable federal, state, and local tax returns that become due after a case commences. Failure to file tax returns timely or obtain an extension can cause a bankruptcy petition to be converted to another chapter or dismissed. In chapter 13 cases, the debtor must file all required tax returns for tax periods ending within 4 years of the filing of the bankruptcy petition.
- The confirmation of a plan under chapter 11 does not discharge a corporate debtor from tax debts for which the debtor filed a fraudulent return or willfully attempted to evade or defeat tax.
- In chapter 11 cases of individuals, wages and income from self-employment earned during the bankruptcy case are property of the estate. Income that is property of the estate should be reported on the bankruptcy estate's tax return.
- Withheld taxes, taxes for which a return was not filed, taxes for which a return was untimely filed within 2 years of the bankruptcy, and taxes that the taxpayer attempted to evade or defeat are now excepted from the chapter 13 discharge.
Photographs of missing children.(p2)
The IRS is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
This publication covers the federal income tax aspects of bankruptcy. Bankruptcy proceedings begin with the filing of a petition in bankruptcy court, and that filing creates the bankruptcy estate.
- The bankruptcy estate generally consists of all of the assets of the person or entity filing the bankruptcy petition.
- The bankruptcy estate is treated as a separate taxable entity if the bankruptcy petition is filed by an individual under chapter 7 or 11 of the Bankruptcy Code, discussed later.
- The tax obligations of taxable estates are discussed later under Taxes and the Bankruptcy Estate.
- Generally, when a debt owed to another person or entity is canceled, the amount canceled or forgiven is considered income that is taxed to the person owing the debt. If a debt is canceled under a bankruptcy proceeding, the amount canceled is not income. However, the canceled debt reduces other tax benefits to which the debtor would otherwise be entitled. See Debt Cancellation, later.
This publication is not intended to cover bankruptcy law in general, or to provide detailed discussions of the tax rules for the more complex corporate bankruptcy reorganizations or other highly technical transactions. Additionally, this publication is not updated on an annual basis and may not reflect recent developments in bankruptcy or tax law. If you need more guidance on the bankruptcy or tax laws applicable to your case, you should seek professional advice.
You may want to see:
Publication 225 Farmer's Tax Guide 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 538 Accounting Periods and Methods 544 Sales and Other Dispositions of Assets 551 Basis of Assets 4492 Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) SS-4: Application for Employer Identification Number, and separate instructions 982: Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) 1040: U.S. Individual Income Tax Return, and separate instructions Schedule SE (Form 1040): Self-Employment Tax 1040X: Amended U.S. Individual Income Tax Return, and separate instructions 1041: U.S. Income Tax Return for Estates and Trusts, and separate instructions 1041-ES: Estimated Income Tax for Estates and Trusts Schedule I (Form 1041): Alternative Minimum Tax (AMT), and separate instructions. 4506: Request for Copy of Tax Return 4506-T: Request for Transcript of Tax Return 4852: Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 4868: Application for Automatic Extension of Time To File U.S. Individual Income Tax Return 7004: Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns
See How To Get Tax Help, later, for information about getting these publications and forms.taxmap/pubs/p908-000.htm#en_us_publink1000137304taxmap/pubs/p908-000.htm#en_us_publink1000117994
For all bankruptcy cases filed after October 16, 2005, the Bankruptcy Code provides that if the debtor does not file a tax return that becomes due after the commencement of the bankruptcy case, or obtain an extension for filing the return before the due date, the taxing authority may request that the court either dismiss the case or convert the case to a case under another chapter of the Bankruptcy Code. If the debtor does not file the required return or obtain an extension within 90 days after the request is made, the bankruptcy court must dismiss or convert the case.taxmap/pubs/p908-000.htm#en_us_publink1000117995
For bankruptcy cases filed after October 16, 2005, the Bankruptcy Code requires chapter 13 debtors to file all required tax returns for tax periods ending within 4 years of the debtor's bankruptcy filing. All such federal tax returns must be filed with the IRS before the date first set for the first meeting of creditors. The debtor may request the trustee to hold the meeting open for an additional 120 days to enable the debtor to file the returns (or until the day the returns are due under an automatic IRS extension, if later). After notice and hearing, the bankruptcy court may extend the period for another 30 days. Failure to timely file the returns can prevent confirmation of a chapter 13 plan and result in either dismissal of the chapter 13 case or conversion of the case to a chapter 7 case.
Trustees may require the debtor to submit copies or transcripts of the debtor's returns as proof of filing. The debtor can request free transcripts of the debtor's income tax returns by filing Form 4506-T with the IRS or by placing a request on the IRS's free Automated Delivery Service (ADS), available by calling 1-800-829-1040. If requested through ADS, the transcript will be mailed to the debtor's most current address according to the IRS's records. Transcripts requested using Form 4506-T may be mailed to any address, including to the attention of the trustee in the debtor's bankruptcy case. Transcripts are normally mailed within 10 to 15 days of receipt of the request by the IRS. A transcript contains most of the information on the debtor's filed return, but it is not a copy of the return. To request a copy of the debtor's filed return, file Form 4506. It may take up to 60 days for the IRS to provide the copies after receipt of the debtor's request, and there is a fee of $57.00 per tax return for copies of the returns.taxmap/pubs/p908-000.htm#en_us_publink1000117996
For bankruptcy cases filed after October 16, 2005, the Bankruptcy Code provides that a chapter 11 debtor's failure to timely file tax returns and pay taxes owed after the date of the order for relief (the bankruptcy petition date in voluntary cases) is cause for dismissal of the chapter 11 case, conversion to a chapter 7 case, or appointment of a chapter 11 trustee.