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Bankruptcy & Substitue Taxes

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jjshawna

Junior Member
Ive filed bankruptcy 7 prior to changes in law taking effect, which is still pending discharge. My question relates to income taxes going back to 1992 when I was married to my first husband (now divorced). I dont recall filing taxes for that year or signing a joint return with my husband. He filed bankruptcy after our divorce in 1995 or 96 and the IRS is coming back saying that I am responsible for 100,000 in taxes now for taxable income that was in my name (we live in AZ which is a community property state). That money was used to purchase a restaurant, which later failed in 1993 due to our divorce. We lost that, as well as any other asset of worth.

The important question I have here is; the IRS said they filed a substitue return in my behalf, does this qualify as a filed return? If so, I should be able to include it in my bankruptcy shouldn't I?

Your help is appreciated.

Sandy
 


abezon

Senior Member
Don't accept the IRS substitute return -- file a 1992 return now. Then list the actual debt in your BK.
 

LdiJ

Senior Member
abezon said:
Don't accept the IRS substitute return -- file a 1992 return now. Then list the actual debt in your BK.
Normally I would agree. However, the cost of filing a 1992 return could be prohibitive for someone in bankruptcy...as well as the fact that she probably doesn't have access to much of the documentation that she would need to do so. I think that for safety's sake she should immediately list the entire 100k in the bankruptcy right away.

I would ask the IRS however to provide the transcripts on which they are basing the 100k before making a final decision whether or not to attempt filing a return.
 

abezon

Senior Member
Definitely list it as a debt, disputed. However, taxes are priority debts and are not usually discharged in BK. They help show that you really are insolvent, but you'll still owe the taxes when you get your discharge. So get on the stick & file a '92 return, 'cause the BK judge is probably going to make you do it anyway. The fact that the debt might only be $2,000 may be a significant factor in whether you get a discharge.
 

LdiJ

Senior Member
abezon said:
Definitely list it as a debt, disputed. However, taxes are priority debts and are not usually discharged in BK. They help show that you really are insolvent, but you'll still owe the taxes when you get your discharge. So get on the stick & file a '92 return, 'cause the BK judge is probably going to make you do it anyway. The fact that the debt might only be $2,000 may be a significant factor in whether you get a discharge.
It is possible to discharge taxes in bankruptcy. (if the debt is old enough) However, certainly the fact that a return was never filed will complicate things.
 

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