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Tax Time For Chapter 13 Debtors – Don’t Miss Your Deductions!

Many chapter 13 Debtors are catching up on mortgage arrears and property taxes in their bankruptcy cases.  Their Trustee payment each month is being distributed by the Trustee to, among others,  the mortgage company and the taxing authorities.  But that is all the Trustee is doing, he is distributing YOUR MONEY.  YOU are still making the payments!

If you are repaying business expenses through your Chapter 13 Case whether you are still operating your business or if you operated a business that failed before you filed your case, you may be paying sales taxes, vendors and landlords through your bankruptcy case.

In New Jersey, and probably everywhere else, the Trustees are on line and the information about who has been paid in your case last year and how much they have been paid is available.  Your accountant needs that information to properly prepare your tax return and give you the best service.  Make your accountant aware of these payments.

Keep the printout you get from the Trustee’s website showing what was paid in your case last year.  It is likely the mortgage lenders the Trustee is paying are not issuing 1098 forms that include the mortgage interest debtors are paying when it is the Trustee who is sending them the checks.   The IRS will not have gotten a matching report from the mortgage lender who received the money and has not reported it to the IRS (or to you).

I am a bankruptcy attorney and I am not a tax professional.  Take this information to your accountant before you file your tax returns.  Let your accountant analyze the information and prepare your taxes with ALL the information available.  If you have been in your bankruptcy case for several years, you may want to go back and look at prior years for amounts paid by the Trustee to mortgage lenders, taxing authorities or in connection with a business.  Your accountant may decide after seeing the payments made by the Trustee in previous years, that it is worth filing amended tax returns for those years.  You can generally amend prior tax returns for up to 3 years.

Interested in how a bankruptcy can help you with past due mortgage payments and taxes?  Give our office a call at 732-302-9600 or fill out our online consultation and we will call you!