November 13, 2019 at 2:24 pm #37116Tammy CoalsonParticipant
Client has come to me after seeing a CPA that filed partnership returns for them for 2014, 2015 with income only, no expenses (they had expenses and they were listed on a spreadsheet, but CPA would not put them on a return without seeing the receipts, not sure why, this info is according to client) and filed the client’s personal return as well. Partnership closed in early part of 2017, but the 2016 & 2017 returns have not been filed. Client is in the process of filing Chapter 13 bankruptcy, but after the 2014 & 2015 returns have been filed, the Client’s attorney has determined that she needs to file Chapter 7. IRS has sent letters that for all years that have been filed, missing 2016 & 2017 filings, she owes over $100k at this time, including $40k in penalties and interest for the 2014 & 2015 tax years. Questions for you are: If client files bankruptcy, can and will IRS go after the other partner for penalties of late filings on the Partnership returns? And does the 2016 & 2017 need to be filed before the bankruptcy is done? Do I, as POA, need to call IRS and give them a docket/case number for the bankruptcy? Advice please.November 14, 2019 at 7:56 am #37142James WadeParticipant
Normally notification of the IRS is done through the bankruptcy filing. I had someone who owed federal tax debts and we sent notification to a location in Philly and to our local US Attorney. So you shouldn’t have to do that.
I don’t know about any requirements in Chapter 7 for filing any back tax returns but it is always better to file the tax returns before filing bankruptcy. Any potential refunds become part of the estate so you’d need to know what they are so the bankruptcy attorney can exempt them (if possible). If there are taxes due then better to get it on the books so it can be resolved in bankruptcy or through other tax resolution options.
Finally, generally any other parties who are jointly or severally liable do not benefit from the bankruptcy discharge. The IRS can still collect from them. Now in Chapter 13 there is a so called “co-debtor” stay which means the IRS cannot collect against any parties who are jointly liable until the Chapter 13 case is closed or dismissed. In this possible Chapter 7 case, the IRS can collect against the other parties for the full amount due.
Those are my off-the-cuff thoughts. Good luck.
JimNovember 18, 2019 at 6:40 pm #37351Tammy CoalsonParticipant
Attorney has said she cannot file bankruptcy without tax owed being more than 3 years from filing dates. And that she needs to get other years filed prior to filing bankruptcy because each year will have money owed to irs as she has been self employed. I do not know about the irs debt having to be 3 years old or older before you can file bankruptcy on it. Would you please confirm or not on this statement? Thank you!!
November 19, 2019 at 5:00 pm #37407Charles ZagaraParticipant
- This reply was modified 8 months, 3 weeks ago by Sandi Leyva.
The bankruptcy discharge rules for income tax are 1) the return must have been due at least 3 years ago So that is 2015 and back. 2016 wasn’t due until 2017. 2) The return must have been filed at least 2 years ago. So any return filed after Nov 19 (today’s date for example) 2017 do not qualify and the taxes must have been assessed at lest 240 days ago.November 26, 2019 at 8:05 am #37777Eric GreenKeymaster
Charles is absolutely correct. In some circuits late filed returns are non-dischargeable as well.
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