I've thought it out and answered my own question. The simplest solution will work just as well, and perhaps avoid flags from either the trustee or IRS.
In my case I originally planned on using the whole "tools of trade" exemption on the truck. If I avoid it altogether, the $600 not claimed makes the "non-homestead" exemption, which is sorta like a wildcard, $600 sweeter.
Hmm..
If the math comes out the same, the trustee shouldn't care if I call the truck my "tool of trade". Question is does it tell something about who I am?
So I guess I haven't answered my question.
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Chapter 7 and Federal Taxes
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hi all.
I have not filed taxes the past couple years because of lack of work as a sole proprietorship. I've had no other income. I have no assets other than a truck w/ fair condition trade-in value of $6000.
I'm hoping to apply the NY $2400 auto, $600 tools of trade, and $0-$2500 no-homestead exemptions on the truck.
My tax questions are:
Presuming I must file my past 2+ years very soon for a BK in the coming months, would it be problematic to do the 1040 long form with the Schedule C reflecting a loss, to highlight the car and truck expenses? I'm eyeing the NY $600 business BK exemption to be used exclusively on the truck.
Would this information be superfluous to a trustee and should I be concerned with an objection to the tools exemption, having not worked? In the future, business use of the truck is very likely.
For what it's worth, even though I've not been gainfully employed, I have used the truck to provide estimates, as well as attend frequent workshops to hone my skills and to expand my base in my area of expertise.
Could the deduction get flagged by the IRS and delayed?
See http://www.irs.gov/taxtopics/tc511.html "If you are unemployed and there is a substantial break between the time of your past work and you're looking for new work, you may not deduct these expenses, even if the new work is in the same trade or business as your previous work."
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thanks
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Thank you for the quick answer! Much relieved.
What would be considered forgiven debt?
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Originally posted by tlcabk View PostWhere would I find information regarding how Discharged debts in a Chapter 7 affect filing my upcoming taxes? Like: Do I pay taxes on the discharged amounts (Consumer debt and a vehichle)?
Go to www.irs.gov, in the search box search for Form 982 and also read the associated publication. 9 times out of 10, a person who files BK does NOT need to file any additional tax forms after the BK.
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Where would I find information regarding how Discharged debts in a Chapter 7 affect filing my upcoming taxes? Like: Do I pay taxes on the discharged amounts (Consumer debt and a vehichle)?
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When a debt is discharged in BK, it is NOT taxable income. Discharged debt IS NOT Forgiven debt.
The bank still might issue a 1099-C, but on IRS Form 982, you simply check the box for "debt was discharged in bankruptcy"
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HHM,
George42 wrote:
Does that mean that since the debts are "discharged" that I won't get any 1099-C from my creditors?
I would be interested in the answer to this question...
Will I be liable for federal taxes on the "forgiven debt" / discharged debt from a Chapter 7 bk? Will it be considered income?
Thanks. Really learned a lot from this thread.
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Originally posted by Vibrant View PostSkimmed this thread, but didn't see the answer I was looking for.
Can someone clarify the rules for audits? In a nutshell - my federal return for tax year 2005 was audited in 2008 and I owe an additional $1200 (peanuts, I know). I'm more than willing to pay it back if required but if I'm NOT, so much the better. Thx!
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Skimmed this thread, but didn't see the answer I was looking for.
Can someone clarify the rules for audits? In a nutshell - my federal return for tax year 2005 was audited in 2008 and I owe an additional $1200 (peanuts, I know). I'm more than willing to pay it back if required but if I'm NOT, so much the better. Thx!
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Originally posted by cinderella View PostThis is very helpful! I did not know there was an IRS agent assigned to my case. I have not received any correspondense from the IRS. (I filed on 10/30/2009).
Do you know know how I can find out who this person is?
Should I wait to call them after the BK? or should I call them now to find out about my 401K?
Should I just wait to file the motion to value or release the lien after I get some information for the IRS or consult with an attorney now?
I'm in a similar situation. I just filed a few weeks ago. I went down to the Federal Building where the IRS was and the IRS Taxpayer Advocates were there. I went in and talked to a lady there to ask her if there was a lien filed against my house (and apparently there isn't!). She was really nice. I was kinda paranoid going in there though. She showed me all the years that I filed for and walked through all the activity on my account through the years and said that it looks like it's flagged because I filed bankruptcy. I felt a lot more relieved after talking to her.
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Don't wait for them, call the IRS. You might want to have your tax attorney lined up first. Good luck.
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This is very helpful! I did not know there was an IRS agent assigned to my case. I have not received any correspondense from the IRS. (I filed on 10/30/2009).
Do you know know how I can find out who this person is?
Should I wait to call them after the BK? or should I call them now to find out about my 401K?
Should I just wait to file the motion to value or release the lien after I get some information for the IRS or consult with an attorney now?
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You can do all this yourself. However if you have a good tax attorney that might be your best bet when dealing with your 401k and the IRS.
Technically that 401k is an excluded asset since it was never part of your bankruptcy filing and is there for the IRS. If the IRS thinks they can even get a few thousand out of it they will try. A good attorney will explain to them why they can't touch it. According to the IRS they don't even need a lien to go after 401k's after bankruptcy discharge.
Your fist step is to contact the IRS insolvency agent assigned to your bk and see what they say. Ask them about releasing the liens.
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Is this something I can do myself? My attorney has been know help since I paid the attorney feeS in full. I have asked about this several times but no one gets back to me. I know I have no assets except for about $20000 in my 401k and most of that is profit sharing which cannot be touched until I retire /about 35 yrs from now. I know I have no other things of value.
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