Part of our Bankruptcy Tuesday series

This month we’ve been talking about tax returns, when you’re going to have to supply a copy to the trustee, and how the return might be helpful to the trustee. This week I’d like to wrap up the subject of tax returns with a few quick observations. What would happen if you aren’t required to file a tax return? That’s not a problem. You would just provide the trustee with an affidavit. This would explain that you did not earn enough money to require a tax filing. What about if you lived or worked in more than one state during a year? Unfortunately, you’re required to file a state tax return for each state in which you earned income. This does not apply, however, if that state does not impose a state income tax. Finally, I wanted to say a few words about tax planning. You don’t want to prepare your tax return only to find out that you owe money to the IRS or the state. Make sure to pay estimated quarterly taxes if you are self-employed or employed as an independent contractor. If you’re a regular employee, check your tax withholding. Are you claiming too many deductions? Conversely, if you’re entitled to a sizable tax refund, it usually means that you haven’t been paying attention to your withholding. Why would you want to give the government an interest-free loan? Instead, adjust your withholding so you get a larger paycheck every week, and you don’t have to wait until next year to get that excess withholding back.

Wishing you knew more about filing taxes under Chapter 13? Check out last week’s Bankruptcy Tuesday’s post: