Considering Bankruptcy? 5 Reasons To Consult A Tax Preparer Now

Are you considering taking the step of filing for bankruptcy protection? Debtors who have exhausted other options can still start over by seeking debt relief through bankruptcy. But, along with consulting a skilled bankruptcy attorney, now is also the time to consult with a skilled tax preparer. Why? Here are a few of the most important things they will help you with.

1. Preparing Old Taxes

Did you file all your prior years' tax forms? If you're not sure, start by getting these completed and filed. This is important for several reasons. First, the bankruptcy court will require a certain amount of past tax returns to be provided. Second, you can get some tax debt discharged in Chapter 7, but only if it's already been filed. 

2. Verifying Accuracy of Returns

If you have filed your prior tax returns, take them to your tax preparation service for a second opinion. Again, you want them to be accurate when the bankruptcy court looks at them. Inaccurate tax filings  — such as underreported income — could be considered a form of bankruptcy fraud and hurt your case. In addition, a second look confirms that no additional funds can be found.

3. Understanding Tax Implications

The good news for bankruptcy petitioners is that debt discharged through bankruptcy is generally not taxable. This is not the case for many other methods of dealing with debt, such as loan forgiveness. Understanding the additional tax complications of all debt management methods will help you pick the best route. 

4. Keeping You Updated

The decision to file for bankruptcy is a big one, and it often takes a person a while to find the right path and timing. Keep your tax information and returns updated while you mull your options. The more you keep up with filing returns, resolving errors, or responding to notices, the less you'll have to do when you do finally file a bankruptcy case. 

5. Planning for the Future

Once your eligible debts are discharged through either Chapter 7 or Chapter 13, you can't file for bankruptcy again for a set number of years. So you must manage your money, debts, and assets well. Tax planning helps with this. A tax preparer can run scenarios, help you avoid future tax debt, and recommend tax-advantaged options for a more stable future. 

Where to Start

Could you use the help of a tax pro in preparing for your bankruptcy? No matter what stage of the decision-making process you're in, the answer is probably yes. Start by meeting with a tax preparation service in your state today.