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taxmap/pubs/p908-000.htm#en_us_publink100038664
Publication 908

Bankruptcy 
Tax Guide

rule

Future Developments (p1)


For the latest information about developments related to Publication 908, such as legislation enacted after it was published, go to www.irs.gov/pub908.

What's New(p2)


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Expiration of provision for catch-up contributions for IRC section 401(k) participants whose employer filed bankruptcy.(p2)
The Pension Protection Act of 2006, P.L. 109-280, previously allowed additional contributions of up to $7,000 in a traditional or Roth IRA for employees who participated in an IRC section 401(k) plan of an employer that filed bankruptcy in an earlier year. This provision was not extended for tax years beginning on or after January 1, 2010.
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Automatic 6-month extension of time to file a bankruptcy estate return now available for individuals in Chapter 7 or 11 bankruptcy.(p2)
Beginning June 24, 2011, the IRS clarified in T.D. 9531 that there is available an automatic 6-month extension of time to file a bankruptcy estate income tax return for individuals in Chapter 7 or Chapter 11 bankruptcy proceedings upon filing a required application. The previous extension of time to file a bankruptcy estate return was 5 months.

Reminders(p2)


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The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005.(p2)
The changes to the U.S. Bankruptcy Code enacted by BAPCA are incorporated throughout this publication.
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 case 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.
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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.

taxmap/pubs/p908-000.htm#en_us_publink1000270804Introduction

EIC
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.
This publication explains the basic federal income tax aspects of bankruptcy.
A fundamental goal of the bankruptcy laws enacted by Congress is to give an honest debtor a financial "fresh start". This is accomplished through the bankruptcy discharge, which is a permanent injunction (court ordered prohibition) against the collection of certain debts as a personal liability of the debtor.
Bankruptcy proceedings begin with the filing of either a voluntary petition in the United States Bankruptcy Court, or in certain cases an involuntary petition filed by creditors. This filing creates 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.

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Useful items

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
 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
 1041-V: Payment Voucher
 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.
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Bankruptcy Code Tax Compliance Requirements(p2)

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Tax Returns Due for Periods Ending Before the Bankruptcy Filing in Chapter 13 Cases(p2)

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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.
EIC
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 to a chapter 7 case.
Note.Individual debtors should use their home address when filing Form 1040 with the IRS. Returns should not be filed "in care of" the trustee's address.
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Ordering tax transcripts and copies of returns.(p2)

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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, Request for Transcript of Tax Return, 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, Request for Copy of Tax Return. 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.
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Tax Returns Due After the Bankruptcy Filing(p3)

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For debtors filing bankruptcy under all chapters (chapters 7, 11, 12, or 13), 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 bankruptcy 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.
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Tax returns and payment of taxes in chapter 11 cases.(p3)
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.
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Disclosure of debtor's return information to trustee.(p3)

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In bankruptcy cases filed under chapter 7 or 11 by individuals, the debtor's income tax returns for the year the bankruptcy case begins and for earlier years are, upon written request, open to inspection by or disclosure to the trustee. If the bankruptcy case was not voluntary, disclosure cannot be made before the bankruptcy court has entered an order for relief, unless the court rules that the disclosure is needed for determining whether relief should be ordered.
In bankruptcy cases other than those of individuals filing under chapter 7 or 11, the debtor's income tax returns for the current and prior years are, upon written request, open to inspection by or disclosure to the trustee, but only if the IRS finds that the trustee has a material interest that will be affected by information on the return. Material interest is generally defined as a financial or monetary interest. Material interest is not limited to the trustee's responsibility to file a return on behalf of the bankruptcy estate.
However, the U.S. Trustee (an officer of the Department of Justice, responsible for maintaining and supervising a panel of private trustees for chapter 7 bankruptcy cases) and the standing chapter 13 trustee (the administrator of chapter 13 cases in a specific geographic region) generally do not have a material interest in the debtor’s return or return information.
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Disclosure of bankruptcy estate's return information to debtor.(p3)

rule
The bankruptcy estate's tax return(s) are open, upon written request, to inspection by or disclosure to the individual debtor in a chapter 7 or 11 bankruptcy. Disclosure of the estate's return to the debtor may be necessary to enable the debtor to determine the amount and nature of the tax attributes, if any, that the debtor assumes when the bankruptcy estate terminates.