Filing Income Tax Returns in a Bankruptcy.
We answer general personal bankruptcy and personal proposal questions on our Ask a Bankruptcy Trustee Blog. When we get a question that a number of people ask and/or a question we think will be of general interest we feature it on its own blog and give a more detailed explanation.
QUESTION ASKED BY Marilyn:
April 22nd, 2006 at 4:54 am e
Does a bankrupt that has not been discharged( November 12/2004-present)
have a choice in were the 2005 income tax return is prepared ? The 2004 return was prepared by the trustee.The relationship has deteriorated and the bankrupt would like to have the return prepared by someone else.
Thank You
ANSWER:
April 22nd, 2006 at 10:55 am e
Marilyn: The trustee will not prepare any tax returns subsequent to the year of bankruptcy. It is the bankrupt’s responsibility to prepare these.
DETAILED ANSWER:
When a person goes into bankruptcy all his assets except the equity in assets exempted by the person’s province or territory of residence “vest in” or belong to the trustee. Income tax refunds, as at the date of bankruptcy, are assets that vest in the trustee. In addition, the trustee will ask the person to assign the post bankruptcy tax return (the tax return for the period from the date of bankruptcy to December 31st.) to the trustee for the benefit of the bankruptcy estate.
Note: If the post bankruptcy tax return does not result in a refund the bankrupt will be responsible for paying any income tax owing since the debt arose after the date of bankruptcy. The trustee may require the bankrupt to file this return if there is no refund available.
It is the duty of the bankrupt to provide the information to the trustee so the trustee can prepare the necessary tax returns.
The trustee is obligated under the Bankruptcy and Insolvency Act to file tax returns for the prior year’s tax returns (year prior to the year of bankruptcy) and the pre bankruptcy’s tax return (for the period January 1st. to the date of bankruptcy) regardless of there being a tax refund available.
Tax returns for the years following the year of the bankruptcy are the responsibility of the bankrupt to file.
June 24th, 2007 at 3:33 pm
Can a bankrupt with a discharge after 9 months with no conditions keep a tax refund if any for the next tax year? I will file my own paper return next year. Will the return go to me or the trustee? Does the trustee have any legal right to keep it? Thankyou
June 26th, 2007 at 9:37 am
If one declares bankruptcy during one calendar year (let’s say October 2007), but has not yet filed income tax returns for previous years (say 2006 and 2005), who is responsible for filing the overdue returns and who receives any refunds from these pre-bankruptcy years? Also, since the discharge from bankruptcy would not occur until well into the next year, 2008, is the Trustee responsible for filing that return as well (and does the trustee receive any refunds owed)?
July 16th, 2007 at 12:32 pm
I am an Ontario resident and I work in the US. I claimed personal bankruptcy in March and included CRA as a creditor based on an estimate of my 2006 taxes. As it turns out, I am getting a refund. I assume that I must give over the refund to my trustee this year. What about my US tax return? I am getting a significant tax refund due to the outcome of my divorce. Do I have to give my US tax refund to the trustee as well? or can I defer some of my tax savings until next year if allowed in the US?
How many years must I give my tax refunds to the trustee? My trustee is on vacation for 2 weeks and I am unable to get an answer; we had not discussed the matter as it was estimated that I would owe in stead of getting a refund.
Please advise.
February 9th, 2008 at 10:04 pm
I filed bankruptcy Apr 1 2007 and I run a small business (non-incorportated). I had business losses in the pre bankruptcy periiod although other pension income gave me a profit. The pro-rated taxes paid on my pre-bankruptcy pension, Jan to Mar, was well above the amount needed since the year ended abruptly, thus resulting in a refund based on the exessive tax paid. I understand that this refund goes to the Trustee. When completing the post bankruptcy return containing a business profit, can I in anyway consider consider my pre bankruptcy business loss. Otherwise it appears to be double jeopardy because under a normal tax year, losses and profits in business are both used.
April 15th, 2008 at 9:11 am
if you have filed for personal bankruptcy when filing taxes my bankruptcy firm did the pre and said I was responsible for the Post. When I went to get my taxes done, they informed me that the bankruptcy firm legally has to do the Pre and Post for that first time. The bankruptcy firm says I am responsible for the post, also when they did the pre they didn’t claim any health tax, and said I have to claim on my Post for the whole year??? Is this also correct?
THanks
Kelly
April 30th, 2008 at 4:45 pm
my common law husband and i are considering going bankrupt. he is filing personally and i have an income tax refund coming. will his bankruptcy interfere with my return
April 30th, 2008 at 4:49 pm
i have one more question, are the arrears of a separation agreement included in the terms of a bankruptcy? that is what has put us here in the first place
September 3rd, 2008 at 9:37 am
Does a personal remain qualified for provincial rent-geared-to-income housing if they intend to file for bankruptcy before a unit is actually offered?