Trustee Blog

Tax Returns on Extension

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As we are still in tax season, here is a suggestion for your bankruptcy practice that may stop your client’s case from being continued:

An attorney asked me what does a trustee do when the Debtor has filed for an extension to file his tax return? Does the Debtor send the extension or the last filed tax return in preparation of the first meeting of creditors.

I said to the attorney to send the last filed tax return as that is what is asked for in the code:

“Section 521(e)(2)(A)(i) requires the debtor to provide the trustee, not later than 7 days before the date first set for the meeting of creditors, “a copy of the Federal income tax return required under applicable law (or at the election of the debtor, a transcript of such return) for the most recent tax year ending immediately before the commencement of the case and for which a Federal income tax return was filed.” 11 U.S.C. § 521(e)(2)(A)(i).[5] If the debtor fails to comply with this requirement, the case must be dismissed “unless the debtor demonstrates that the failure to so comply is due to circumstances beyond the control of the debtor.” 11 U.S.C. § 521(e)(2)(B).”

The trustee is entitled to the “last filed” tax return.If the last time the debtor filed a tax return was 2009, then send a copy of the 2009 tax return as that is what is asked for in the code. However the trustee may ask the debtor to file a tax return, even if it is on “extension”. I have seen Chapter 7 trustees continue the meetings of creditors in order for the debtor to file the tax return for the current year.

The moral of the story is to have the client file his tax returns and send to teh trustee a current year copy. If the client cannot file the current year taxes, then the client should be warned that the trustee may prolong the case in anticipation of the tax return being filed. If the client has this knowledge ahead of time, then this may light a fire under him to file the returns prior to the hearing.

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