Filing a bankruptcy case without filing any outstanding tax returns is never a good idea, and typically causes problems for bankruptcy debtors. In any type of bankruptcy case, whether filed under Chapter 7, 11, or 13, one of the many documents required to be completed and submitted by all debtors is a Statement of Financial Affairs (SOFA). The SOFA consists of over twenty questions requesting information in various categories, including income from employment or operation of a business.
The fourth (formerly the first) question to be answered on the SOFA is the debtor(s) total income for the year of the bankruptcy filing up to the petition date, as well as income for the two years prior to the year of filing. Bankruptcy trustees in all types of bankruptcy cases verify a debtors’ income by reviewing their tax returns. This occurs in all cases, whether filed under Chapter 7, 11, or 13.
11 U.S.C. § 521 includes automatic dismissal provisions that may apply after 45 days have passed since the filing of a case. An assigned trustee must review each such case to determine whether the debtor has complied with all filing requirements set forth in 11 U.S.C. §521(a)(1). Courts may continue to dismiss cases under a court’s local rules and procedures earlier than the 46th day if there are any filing deficiencies.
Pursuant to § 521(f) of the Bankruptcy Code, at the request of the court, the trustee, or any party in interest in a case under chapter 7, 11, or 13, an individual debtor must file with the court at the same time filed with the taxing authority, a copy of each required Federal income tax return for each tax year ending while the case is pending. Thus, for every year the debtor is in bankruptcy, he or she must file a copy of his or her tax return for that year.
An individual debtor must file at the same time filed with the taxing authority, each required Federal income tax return that had not been filed with the taxing authority as of the date of the commencement of the case and that was subsequently filed for any tax year of the debtor ending in the 3-year period ending on the date of the commencement of the case. Thus, if a tax return due in one of the three years prior to the petition date had not been filed as of the petition date and then subsequently filed with the IRS or the Florida Department of Revenue while the bankruptcy case is still pending, a copy or transcript must be filed with the bankruptcy court.
A copy of any amendment to any Federal income tax return or transcript filed with the court must also be filed. At the election of the debtor, a transcript of such tax return may be filed in lieu of a copy of the actual return.
In chapter 13 cases, debtors must make a statement, under penalty of perjury, of their income and expenditures during the tax year most recently concluded before such statement is filed. This statement must include the monthly income of the debtor and indicate how income, expenditures, and monthly income were calculated.
This statement must be made either 90 days after the end of a tax year or one year after the date of the commencement of the case, whichever is later if a plan is not confirmed before the later date. Thereafter, debtors must make this statement annually after the plan is confirmed and until the case is closed, not later than the date 45 days prior to the anniversary of the plan’s confirmation.
Local Bankruptcy Rule 1017-2(C) of the Southern District of Florida provides for dismissal under 11 U.S.C. §521(e)(2)(B) for the failure to provide tax returns. The court will dismiss cases under section 521(e)(2)(B), only upon motion and after a hearing on notice to the debtor. Any motion to dismiss filed by a creditor must include language that the creditor timely requested a copy of the return under Bankruptcy Rule 4002(b)(4).