How Consumer Bankruptcy Can Impact Your Tax Returns

Everyone knows that they need to file their personal income taxes each year, usually by April 15th. This deadline sometimes changes because of a federal holiday or some other obscure event like what happened this year. That is why your 2021 personal income taxes were due on April 18th, 2022.

It is important to check what the deadline is for your individual tax returns because we are all under a legal obligation to get them filed timely. You don’t want to file your tax returns late and incur a penalty.

There are also many people who file their taxes on time but do not really worry about how accurate those tax returns are, which can be just as bad if not worse. People forget that there is a second legal obligation that they are under when it comes to filing their personal tax returns, which is that a tax return must be accurate. Many times, a tax return is not accurate, and it is not always the explicit fault of the person who filed it.

Maybe they went to a tax preparer who wasn’t up on the latest rules and regulations? Maybe they did the tax returns themselves in the hope of getting a bigger return and saving some money, but made an honest mistake? Maybe some other scenario came into play that couldn’t reasonably be predicted? In any situation, it doesn’t matter to the Internal Revenue Service (IRS). If a tax return is not accurate, it must be amended and fixed.

This is one of those situations where it’s better to do it right the first time than to have to do it over later. To file a consumer bankruptcy case, you must have filed your previous years’ taxes, and they must be accurate. This is not a problem for most people, as the overwhelming majority of people get their taxes filed timely and accurately. However, for those individuals who take their individual tax returns less seriously, it is important that you get your taxes prepared by someone who knows what they are doing.

The tax code is broken and complicated. There is no push in Washington to simplify it, and quite shockingly, we are all supposed to know what is in the tax code and abide by it. This can really set people up for failure, even if they mean well when filing.

Unfortunately, our team of bankruptcy attorneys at Dellutri Law Group has had some clients who have had to amend their tax returns while in a consumer bankruptcy case because their original filing was inaccurate. This costs our clients time and money and delays their discharge. Many times, there is no defense to an inaccurate tax return, though, because we are all under a legal obligation to get them done accurately and on time – and the IRS is not known for leniency.