 Internal Revenue Service, IRS tax news, understanding federal tax obligations during chapter 13 bankruptcy. I'll tell you what, the one main thing we, the IRS, want you to know about bankruptcy is, we still want our money, or your money, or however you want to look at it. The point is, bankruptcy may get you out of that business loan you were given by your loving, trusting grandmother, but the only reason the law allows that is so you still have the money to pay your uncle Sam. But first an attempt at a joke. The naming of the Inflation Reduction Act has no rhyme nor reason. Well, there's no rhyme or reason to it. You know, they basically admit the bill's not designed to reduce inflation. So I tried turning the chronological gauge backwards. It's not designed to go backward, Brian. So, there's no rhyme nor reason for the name? That makes no sense. What do you mean? Are you sure it doesn't? Oh, the truth. I mean, it's like they're not even trying anymore. Find Waldo yet again. Man, he's just not trying anymore. We know they threw reason out the window a long time ago, but if they're not going to give us any reason, at least they could give us a nice rhyme. You know what I mean? Needed to put your entire soul into it. Now rhyme, jazzy rhyme. I got nothing. Just took me back to my candles. Like, how hard can it be to make a nice rhyme? You know, something like, if it don't fit, you must acquit. If you buy a lift on end or you must acquit, the defense rests. At least then we could be like, well, yeah, it did sound cool. We were never on your side to begin with. Regardless, it sounded cool. They could call the bill something like, oh, I don't know. Even though it's clearly just a scam, just keep giving money to the man. Okay, that was good. That was good. What's that, Phil? Scam and man don't rhyme. It doesn't rhyme. The new stuff doesn't rhyme. It's close, Phil. Okay. At least, I mean, at least it's close. I tried. At least I tried. That's the point. They're not, they're not even trying anymore for rhyme or reason, reason or rhyme. Not either one. They're not even trying. You're not even trying. All right, new rule. No more. As tax tip 2022-133, August 32, 2022, bankruptcy is a last resort for taxpayers to get out of debts for individuals. The most common type of bankruptcy is Chapter 13. There's a link to that here. This section of the bankruptcy law allows individuals and small business owners in financial difficulty to repay their creditors. Chapter 13 bankruptcy is only available to wage earners, the self-employed and sole proprietor businesses. Tax obligations while filing Chapter 13 bankruptcy. So clearly, if you're thinking about going into Chapter 13 bankruptcy, you want to do your research on it. It can be a long process. You want to know what the hurdles are that you might have to be going through to get through the whole process of the bankruptcy process. Taxpayers must file all required tax returns for tax periods ending within four years of their bankruptcy filing. During a bankruptcy, taxpayers must continue to file or get an extension of time to file all required returns. During a bankruptcy case, taxpayers should pay all current taxes as they come due. Failure to file returns and pay current taxes during a bankruptcy may result in a case being dismissed, converted to a Liquid 18 bankruptcy Chapter 7 or the Chapter 13 plan may not be confirmed. So you want to make sure that you're understanding the different kind of chapters related to bankruptcy, what are the rationale as to why you would be using that tool of bankruptcy and that particular form of bankruptcy and then what are the steps that need to be taken in order to complete that process once you've made a decision on the best route to go. So other things to know if the IRS is listed as a creditor in their bankruptcy. The IRS will receive electronic notice about their case from the U.S. bankruptcy courts. People can check by calling the IRS centralized insolvency operation at 800-9730424. I won't say that five times because there'll be a link to this in the description and giving them a bankruptcy case number. So you want to make sure you got your case number ready to go if you're trying to contact them. If one of the reasons a taxpayer is filing bankruptcy is overdue federal tax debts, they may need to increase their withholdings or their estimated tax payments. The tax withholding estimator, there's a link to that here, can help people determine the proper withholding. The IRS.gov estimated taxes page, there's a link to that here has more information on estimated taxes. People can receive tax refunds while in bankruptcy, however, refunds may be subject to delay or used to pay down their tax debts. So taxpayers can see if their refund has been delayed or offset against their tax debts by going to the where's by refund tool or by contacting the centralized insolvency operations unit. So if you obviously if you have a refund coming to you because you filed your tax return, you have a refund and you owe the IRS money, then the IRS is likely to keep it. If you owe other people money, then the IRS may apply it somewhere else if it's if it's someone that the IRS is kind of like aware of or affiliated with. And so so just and of course you can look that up by by asking where's by refund and they should give you notice in terms of yeah, you had a refund processed and we gave your refund to someone you owed money to possibly ourselves for past due debts for some other some other tax year or something. So other types of bankruptcy partnership and corporations filed bankruptcy under chapter seven liquidation or chapter 11 reorganization. There's links to those two bankruptcy chapters of the bankruptcy code individuals may also file under chapter seven or chapter 11. Other types of bankruptcy include chapter 9 12 and 15. There's links to those here. So cases under these chapters of bankruptcy code involve municipalities, family, farmers and fishermen and international cases. So more information can be found at the links below IRS Declaring Bankruptcy webpage publication 908 bankruptcy tax guide publication 508 to what you should know about chapter 13 bankruptcy and delinquent returns. There's links to all that wonderful stuff here. There'll be a link to this in the description.