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1040e

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1040e

1040e Publication 908 - Main Content Table of Contents Bankruptcy Code Tax Compliance RequirementsTax Returns Due for Periods Ending Before the Bankruptcy Filing in Chapter 13 Cases Tax Returns Due After the Bankruptcy Filing Individuals in Chapter 12 or 13 Individuals in Chapter 7 or 11Debtor's Election To End Tax Year – Form 1040 Taxes and the Bankruptcy Estate Bankruptcy Estate – Income, Deductions, and Credits Tax Reporting – Chapter 11 Cases Bankruptcy Estate Tax Return Filing Requirements and Payment of Tax Due Tax Return Example – Form 1041 Partnerships and CorporationsFiling Requirements Partnerships Corporations Receiverships Determination of TaxPrompt Determination Requests Court Jurisdiction Over Tax MattersBankruptcy Court Tax Court Federal Tax ClaimsUnsecured Tax Claims Discharge of Unpaid Tax Debt CancellationExclusions Reduction of Tax Attributes Partnerships Corporations Tax Attribute Reduction Example How To Get Tax HelpTaxpayer Advocacy Panel (TAP). 1040e Low Income Taxpayer Clinics (LITCs). 1040e Bankruptcy Code Tax Compliance Requirements Tax Returns Due for Periods Ending Before the Bankruptcy Filing in Chapter 13 Cases The Bankruptcy Code requires chapter 13 debtors to file all required tax returns for tax periods ending within 4 years of the debtor's bankruptcy filing. 1040e All such federal tax returns must be filed with the IRS before the date first set for the first meeting of creditors. 1040e The debtor may request the trustee to hold the meeting open for an additional 120 days to enable the debtor to file the returns (or until the day the returns are due under an automatic IRS extension, if later). 1040e After notice and hearing, the bankruptcy court may extend the period for another 30 days. 1040e Failure to timely file the returns can prevent confirmation of a chapter 13 plan and result in either dismissal of the chapter 13 case or conversion to a chapter 7 case. 1040e Note. 1040e Individual debtors should use their home address when filing Form 1040 with the IRS. 1040e Returns should not be filed “in care of” the trustee's address. 1040e Ordering tax transcripts and copies of returns. 1040e   Trustees may require the debtor to submit copies or transcripts of the debtor's returns as proof of filing. 1040e The debtor can request free transcripts of the debtor's income tax returns by filing Form 4506-T, Request for Transcript of Tax Return, with the IRS or by placing a request on the IRS's free Automated Delivery Service (ADS), available by calling 1-800-829-1040. 1040e If requested through ADS, the transcript will be mailed to the debtor's most current address according to the IRS's records. 1040e Transcripts requested using Form 4506-T may be mailed to any address, including to the attention of the trustee in the debtor's bankruptcy case. 1040e Transcripts are normally mailed within 10 to 15 days of receipt of the request by the IRS. 1040e A transcript contains most of the information on the debtor's filed return, but it is not a copy of the return. 1040e To request a copy of the debtor's filed return, file Form 4506, Request for Copy of Tax Return. 1040e It may take up to 60 days for the IRS to provide the copies after receipt of the debtor's request, and there is a fee of $57. 1040e 00 per tax return for copies of the returns. 1040e Tax Returns Due After the Bankruptcy Filing For debtors filing bankruptcy under all chapters (chapters 7, 11, 12, or 13), the Bankruptcy Code provides that if the debtor does not file a tax return that becomes due after the commencement of the bankruptcy case, or obtain an extension for filing the return before the due date, the taxing authority may request that the bankruptcy court either dismiss the case or convert the case to a case under another chapter of the Bankruptcy Code. 1040e If the debtor does not file the required return or obtain an extension within 90 days after the request is made, the bankruptcy court must dismiss or convert the case. 1040e Tax returns and payment of taxes in chapter 11 cases. 1040e   The Bankruptcy Code provides that a chapter 11 debtor's failure to timely file tax returns and pay taxes owed after the date of the “order for relief” (the bankruptcy petition date in voluntary cases) is cause for dismissal of the chapter 11 case, conversion to a chapter 7 case, or appointment of a chapter 11 trustee. 1040e Disclosure of debtor's return information to trustee. 1040e   In bankruptcy cases filed under chapter 7 or 11 by individuals, the debtor's income tax returns for the year the bankruptcy case begins and for earlier years are, upon written request, open to inspection by or disclosure to the trustee. 1040e If the bankruptcy case was not voluntary, disclosure cannot be made before the bankruptcy court has entered an order for relief, unless the court rules that the disclosure is needed for determining whether relief should be ordered. 1040e    In bankruptcy cases other than those of individuals filing under chapter 7 or 11, the debtor's income tax returns for the current and prior years are, upon written request, open to inspection by or disclosure to the trustee, but only if the IRS finds that the trustee has a material interest that will be affected by information on the return. 1040e Material interest is generally defined as a financial or monetary interest. 1040e Material interest is not limited to the trustee's responsibility to file a return on behalf of the bankruptcy estate. 1040e   However, the U. 1040e S. 1040e Trustee (an officer of the Department of Justice, responsible for maintaining and supervising a panel of private trustees for chapter 7 bankruptcy cases) and the standing chapter 13 trustee (the administrator of chapter 13 cases in a specific geographic region) generally do not have a material interest in the debtor’s return or return information. 1040e Disclosure of bankruptcy estate's return information to debtor. 1040e    The bankruptcy estate's tax return(s) are open, upon written request, to inspection by or disclosure to the individual debtor in a chapter 7 or 11 bankruptcy. 1040e Disclosure of the estate's return to the debtor may be necessary to enable the debtor to determine the amount and nature of the tax attributes, if any, that the debtor assumes when the bankruptcy estate terminates. 1040e Individuals in Chapter 12 or 13 Only individuals may file a chapter 13 bankruptcy. 1040e Chapter 13 relief is not available to corporations or partnerships. 1040e The bankruptcy estate is not treated as a separate entity for tax purposes when an individual files a petition under chapter 12 (Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income) or 13 (Adjustment of Debts of an Individual with Regular Income) of the Bankruptcy Code. 1040e In these cases the individual continues to file the same federal income tax returns that were filed prior to the bankruptcy petition, Form 1040, U. 1040e S. 1040e Individual Income Tax Return. 1040e On the debtor's individual tax return, Form 1040, report all income received during the entire year and deduct all allowable expenses. 1040e Do not include in income the amount from any debt canceled due to the debtor's bankruptcy. 1040e To the extent the debtor has any losses, credits, or basis in property that were previously reduced as a result of canceled debt, these reductions must be included on the debtor's return. 1040e See Debt Cancellation, later. 1040e Interest on trust accounts in chapter 13 cases. 1040e   In chapter 13 proceedings, do not include interest earned on amounts held by the trustee in trust accounts as income on the debtor's return. 1040e This interest is not available to either the debtor or creditors, it is available only to the trustee for use by the U. 1040e S. 1040e Trustee system. 1040e The interest is also not taxable to the trustee as income. 1040e Individuals in Chapter 7 or 11 When an individual debtor files for bankruptcy under chapter 7 or 11 of the Bankruptcy Code, the bankruptcy estate is treated as a new taxable entity, separate from the individual taxpayer. 1040e The bankruptcy estate in a chapter 7 case is represented by a trustee. 1040e The trustee is appointed to administer the estate and liquidate any nonexempt assets. 1040e In chapter 11 cases, the debtor often remains in control of the assets as a “debtor-in-possession” and acts as the bankruptcy trustee. 1040e However, the bankruptcy court, for cause, may appoint a trustee if such appointment is in the best interests of the creditors and the estate. 1040e During the chapter 7 or 11 bankruptcy, the debtor continues to file an individual tax return on Form 1040. 1040e The bankruptcy trustee files a Form 1041 for the bankruptcy estate. 1040e However, when a debtor in a chapter 11 bankruptcy case remains a debtor-in-possession, he or she must file both a Form 1040 individual return and a Form 1041 estate return for the bankruptcy estate (if return filing requirements are met). 1040e Although a husband and wife may file a joint bankruptcy petition whose bankruptcy estates are jointly administered, the estates are be treated as two separate entities for tax purposes. 1040e Two separate bankruptcy estate income tax returns must be filed (if each spouse separately meets the filing requirements). 1040e For information about determining the tax due and paying tax for a chapter 7 or 11 bankruptcy estate, see Bankruptcy Estate Tax Return Filing Requirements and Payment of Tax Due, later. 1040e Debtor's Election To End Tax Year – Form 1040 Short tax years. 1040e   An individual debtor in a chapter 7 or 11 case may elect to close the debtor's tax year for the year in which the bankruptcy petition is filed, as of the day before the date on which the bankruptcy case commences. 1040e If the debtor makes this election, the debtor's tax year is divided into 2 short tax years of less than 12 months each. 1040e The first tax year ends on the day before the commencement date and the second tax year begins on the commencement date. 1040e   If the election is made, the debtor's federal income tax liability for the first short tax year becomes an allowable claim against the bankruptcy estate arising before the bankruptcy filing. 1040e Also, the tax liability for the first short tax year is not subject to discharge under the Bankruptcy Code. 1040e    If the debtor does not make an election to end the tax year, the commencement of the bankruptcy case does not affect the debtor's tax year. 1040e Also, no part of the debtor's income tax liability for the year in which the bankruptcy case commences can be collected from the bankruptcy estate. 1040e Note. 1040e The debtor cannot make a short tax year election if no assets, other than exempt property, are in the bankruptcy estate. 1040e Making the Election - Filing Requirements First short tax year. 1040e   The debtor can elect to end the debtor's tax year by filing a return on Form 1040 for the first short tax year. 1040e The return must be filed on or before the 15th day of the fourth full month after the end of that first tax year. 1040e Second short tax year. 1040e   If the debtor elects to end the tax year on the day before filing the bankruptcy case, the debtor must file the return for the first short tax year in the manner discussed above. 1040e   If the debtor makes this election, the debtor must also file a separate Form 1040 for the second short tax year by the regular due date. 1040e To avoid delays in processing the return, write “Second Short Year Return After Section 1398 Election” at the top of the return. 1040e Example. 1040e Jane Doe, an individual calendar year taxpayer, filed a bankruptcy petition under chapter 7 or 11 on May 8, 2012. 1040e If Jane elected to close her tax year at the commencement of her case, Jane's first short year for 2012 runs from January 1 through May 7, 2012. 1040e Jane's second short year runs from May 8, 2012, through December 31, 2012. 1040e To have a timely filed election for the first short year, Jane must file Form 1040 (or an extension of time to file) for the period January 1 through May 7 by September 15. 1040e To avoid delays in processing the return, write “Section 1398 Election” at the top of the return. 1040e The debtor may also make the election by attaching a statement to Form 4868, Automatic Extension of Time to File an U. 1040e S. 1040e Individual Tax Return. 1040e The statement must state that the debtor elects under IRC section 1398(d)(2) to close the debtor's tax year on the day before filing the bankruptcy case. 1040e The debtor must file Form 4868 by the due date of the return for the first short tax year. 1040e The debtor's spouse may also elect to close his or her tax year, see Election by debtor's spouse, below. 1040e Election by debtor's spouse. 1040e   If the debtor is married, the debtor's spouse may join in the election to end the tax year. 1040e If the debtor and spouse make a joint election, the debtor must file a joint return for the first short tax year. 1040e The debtor must elect by the due date for filing the return for the first short tax year. 1040e Once the election is made, it cannot be revoked for the first short tax year. 1040e However, the election does not prevent the debtor and the spouse from filing separate returns for the second short tax year. 1040e Later bankruptcy of spouse. 1040e    If the debtor's spouse files for bankruptcy later in the same year, he or she may also choose to end his or her tax year, regardless of whether he or she joined in the election to end the debtor's tax year. 1040e   As each spouse has a separate bankruptcy, one or both of them may have 3 short tax years in the same calendar year. 1040e If the debtor's spouse joined the debtor's election or if the debtor had not made the election to end the tax year, the debtor can join in the spouse's election. 1040e However, if the debtor made an election and the spouse did not join that election, the debtor cannot then join the spouse's later election. 1040e The debtor and the spouse are precluded from this election because they have different tax years. 1040e This results because the debtor does not have a tax year ending the day before the spouse's filing for bankruptcy, and the debtor cannot file a joint return for a year ending on the day before the spouse's filing of bankruptcy. 1040e Example 1. 1040e Paul and Mary Harris are calendar-year taxpayers. 1040e Paul's voluntary chapter 7 bankruptcy case begins on March 4. 1040e If Paul does not make an election, his tax year does not end on March 3. 1040e If he makes an election, Paul's first tax year is January 1–March 3, and his second tax year begins on March 4. 1040e Mary could join in Paul's election as long as they file a joint return for the tax year January 1–March 3. 1040e They must make the election by July 15, the due date for filing the joint return. 1040e Example 2. 1040e Fred and Ethel Barnes are calendar-year taxpayers. 1040e Fred's voluntary chapter 7 bankruptcy case begins on May 6, and Ethel's bankruptcy case begins on November 1 of the same year. 1040e Ethel could elect to end her tax year on October 31. 1040e If Fred did not elect to end his tax year on May 5, or if he elected to do so but Ethel had not joined in his election, Ethel would have 2 tax years in the same calendar year if she decided to close her tax year. 1040e Her first tax year is January 1–October 31, and her second year is November 1–December 31. 1040e If Fred did not end his tax year as of May 5, he could join in Ethel's election to close her tax year on October 31, but only if they file a joint return for the tax year January 1–October 31. 1040e If Fred elected to end his tax year on May 5, but Ethel did not join in Fred's election, Fred cannot join in Ethel's election to end her tax year on October 31. 1040e Fred and Ethel cannot file a joint return for that short tax year because their tax years preceding October 31 were not the same. 1040e Example 3. 1040e Jack and Karen Thomas are calendar-year taxpayers. 1040e Karen's voluntary chapter 7 bankruptcy case began on April 10, and Jack's voluntary chapter 7 bankruptcy case began on October 3 of the same year. 1040e Karen elected to close her tax year on April 9 and Jack joins in Karen's election. 1040e Under these facts, Jack would have 3 tax years for the same calendar year if he makes the election relating to his own bankruptcy case. 1040e The first tax year would be January 1–April 9; the second, April 10–October 2; and the third, October 3–December 31. 1040e Karen may join in Jack's election if they file a joint return for the second short tax year (April 10–October 2). 1040e If Karen does join in, she would have the same 3 short tax years as Jack. 1040e Also, if Karen joins in Jack's election, they may file a joint return for the third tax year (October 3–December 31), but they are not required to do so. 1040e Annualizing taxable income. 1040e   If the debtor elects to close the tax year, the debtor must annualize taxable income for each short tax year in the same manner a change in annual accounting period is calculated. 1040e See Short Tax Year in Publication 538, for information on how to annualize the debtor's income and to figure the tax for the short tax year. 1040e Dismissal of bankruptcy case. 1040e   If the bankruptcy court later dismisses an individual chapter 7 or 11 case, the bankruptcy estate is no longer treated as a separate taxable entity. 1040e It is as if no bankruptcy estate was created for tax purposes. 1040e In this situation, the debtor must file amended tax returns on Form 1040X, to replace all full or short year individual returns (Form 1040) and bankruptcy estate returns (Form 1041) filed as a result of the bankruptcy case. 1040e Income, deductions, and credits previously reported by the bankruptcy estate must be reported on the debtor's amended returns. 1040e Attach a statement to the amended returns explaining why the debtor is filing an amended return. 1040e Taxes and the Bankruptcy Estate Property of the bankruptcy estate. 1040e   At the commencement of a bankruptcy case a bankruptcy estate is created. 1040e Bankruptcy law determines which of the debtor's assets become part of a bankruptcy estate. 1040e This estate generally includes all of the debtor's legal and equitable interests in property as of the commencement date. 1040e However, there are exceptions and certain property is exempted or excluded from the bankruptcy estate. 1040e Note. 1040e Exempt property and abandoned property are initially part of the bankruptcy estate, but are subsequently removed from the estate. 1040e Excluded property is never included in the estate. 1040e Transfer of assets between debtor and bankruptcy estate. 1040e   The transfer (other than by sale or exchange) of an asset from the debtor to the bankruptcy estate is not treated as a disposition for income tax purposes. 1040e The transfer does not result in gain or loss, acceleration of income or deductions, or recapture of deductions or credits. 1040e For example, the transfer of an installment obligation to the estate would not accelerate gain under the rules for reporting installment sales. 1040e The estate assumes the same basis, holding period, and character of the transferred assets. 1040e Also, the estate generally accounts for the transferred assets in the same manner as debtor. 1040e   When the bankruptcy estate is terminated or dissolved, any resulting transfer (other than by sale or exchange) of the estate's assets back to the debtor is also not treated as a disposition for tax purposes. 1040e The transfer does not result in gain or loss, acceleration of income or deductions, or recapture of deductions or credits to the estate. 1040e Abandoned property. 1040e    The abandonment of property by the estate to the debtor is a nontaxable disposition of property. 1040e If the debtor received abandoned property from the bankruptcy estate, the debtor assumes the same basis in the property that the bankruptcy estate had. 1040e Separate taxable entity. 1040e   When an individual files a bankruptcy petition under chapter 7 or 11, the bankruptcy estate is treated as a separate taxable entity from the debtor. 1040e The court appointed trustee or the debtor-in-possession is responsible for preparing and filing all of the bankruptcy estate's tax returns, including its income tax return on Form 1041, U. 1040e S. 1040e Income Tax Return for Estates and Trusts, and paying its taxes. 1040e The debtor remains responsible for filing his or her own returns on Form 1040, U. 1040e S. 1040e Individual Income Tax Return, and paying taxes on income that does not belong to the estate. 1040e Employer identification number. 1040e   The trustee or debtor-in-possession must obtain an EIN for a bankruptcy estate. 1040e The trustee or debtor-in-possession uses this EIN on all tax returns filed for the bankruptcy estate with the IRS, including estimated tax returns. 1040e See Employer identification number, under Bankruptcy Estate Tax Return Filing Requirements and Payment of Tax Due, later. 1040e    The social security number of the individual debtor cannot be used as the EIN for the bankruptcy estate. 1040e Income, deductions, and credits – Form 1040. 1040e   In an individual chapter 7 or 11 bankruptcy case, do not include the income, deductions, and credits that belong to the bankruptcy estate on the debtor's individual income tax return (Form 1040). 1040e Also, do not include as income on the debtor's return the amount of any debt canceled by reason of the bankruptcy discharge. 1040e The bankruptcy estate must reduce certain losses, credits, and the basis in property (to the extent of these items) by the amount of canceled debt. 1040e See Debt Cancellation, below. 1040e Note. 1040e The debtor may not be able to claim certain deductions available to the bankruptcy estate such as administrative expenses. 1040e Additionally, the bankruptcy exclusion cannot be used to exclude income from a cancelled debt if the discharge of indebtedness was not within the bankruptcy case, even though the debtor was under the bankruptcy court's protection at the time. 1040e However, other exclusions, such as the insolvency exclusion, may apply. 1040e Bankruptcy Estate – Income, Deductions, and Credits Bankruptcy Estate Income Income of the estate in individual chapter 7 cases. 1040e    The gross income of the bankruptcy estate includes gross income of the debtor to which the estate is entitled under the Bankruptcy Code. 1040e Gross income also includes income generated by the bankruptcy estate from property of the estate after the commencement of the case. 1040e   Gross income of the bankruptcy estate does not include amounts received or accrued by the debtor before the commencement of the case. 1040e Additionally, in chapter 7 cases, gross income of the bankruptcy estate does not include any income that the debtor earns after the date of the bankruptcy petition. 1040e Income of the estate in individual chapter 11 cases. 1040e    In chapter 11 cases, under IRC section 1398(e)(1), gross income of the bankruptcy estate includes income that the debtor earns for services performed after the bankruptcy petition date. 1040e Also, earnings from services performed by an individual debtor after the commencement of the chapter 11 case are property of the bankruptcy estate under section 1115 of the Bankruptcy Code (11 U. 1040e S. 1040e C. 1040e section 1115). 1040e Note. 1040e A debtor-in-possession may be compensated by the estate for managing or operating a trade or business that the debtor conducted before the commencement of the bankruptcy case. 1040e Such payments should be reported by the debtor as miscellaneous income on his or her individual income tax return (Form 1040). 1040e Amounts paid by the estate to the debtor-in-possession for managing or operating the trade or business may qualify as administrative expenses of the estate. 1040e See Administrative expenses, below. 1040e Conversion or dismissal of chapter 11 cases. 1040e   If a chapter 11 case is converted to a chapter 13 case, the chapter 13 estate is not a separate taxable entity and earnings from post-conversion services and income from property of the estate realized after the conversion to chapter 13 are taxed to the debtor. 1040e If the chapter 11 case is converted to a chapter 7 case, 11 U. 1040e S. 1040e C. 1040e section 1115 does not apply after conversion and: Earnings from post-conversion services will be taxed to the debtor, rather than the estate, and The property of the chapter 11 estate will become property of the chapter 7 estate. 1040e Any income on this property will be taxed to the estate even if the income is realized after the conversion to chapter 7. 1040e If a chapter 11 case is dismissed, the debtor is treated as if the bankruptcy case had never been filed and as if no bankruptcy estate had been created. 1040e Bankruptcy Estate Deductions and Credits A bankruptcy estate deducts expenses incurred in a trade, business, or activity, and uses credits in the same way the debtor would have deducted or credited them had he or she continued operations. 1040e Note. 1040e Expenses may be disallowed under other provisions of the IRC (such as the disallowance of certain capital expenditures or expenses relating to tax-exempt interest). 1040e Administrative expenses. 1040e   Allowable expenses include administrative expenses. 1040e    Administrative expenses can only be deducted by the estate, never by the debtor. 1040e   The bankruptcy estate is allowed deductions for bankruptcy administrative expenses and fees, including accounting fees, attorney fees, and court costs. 1040e These expenses are deductible on Form 1040, Schedule A as miscellaneous itemized deductions not subject to the 2% floor on miscellaneous itemized deductions, because they would not have been incurred if property had not been held by the bankruptcy estate. 1040e See IRC section 67(e). 1040e Administrative expenses of the bankruptcy estate attributable to conducting a trade or business for the production of estate rents or royalties are deductible in arriving at adjusted gross income on Form 1040, Schedules C, E, and F. 1040e Note. 1040e The bankruptcy estate uses Form 1041 as a transmittal for the tax return prepared using Form 1040 and its schedules. 1040e See Transmittal for Form 1040 under Tax Return Filing Requirements and Payment of Tax, later. 1040e Administrative expense loss. 1040e   If the administrative expenses of the bankruptcy estate are more than its gross income for a tax year, the excess amount may be carried back 3 years and forward 7 years. 1040e The amounts can only be carried to a tax year of the estate and never to a debtor's tax year. 1040e The excess amount to be carried back or forward is treated like a net operating loss (NOL) and must first be carried back to the earliest year possible. 1040e For a discussion of NOLs, see Publication 536. 1040e Attribute carryovers. 1040e   The bankruptcy estate may use its tax attributes the same way that the debtor would have used them. 1040e These items are determined as of the first day of the debtor's tax year in which the bankruptcy case begins. 1040e The bankruptcy estate assumes the following tax attributes from the debtor: NOL carryovers, Carryovers of excess charitable contributions, Recovery of tax benefit items, Credit carryovers, Capital loss carryovers, Basis, holding period, and character of assets, Method of accounting, Passive activity loss and credit carryovers, Unused at-risk deductions, and Other tax attributes provided in the regulations. 1040e   Certain tax attributes of the bankruptcy estate must be reduced by the amount of income that was previously excluded as a result of cancellation of debt during the bankruptcy proceeding. 1040e See Debt Cancellation, later. 1040e   When the bankruptcy estate is terminated (for example, when the case ends), the debtor assumes any remaining tax attributes previously taken over by the bankruptcy estate. 1040e The debtor also generally assumes any of the tax attributes, listed above, that arose during the administration of the bankruptcy estate. 1040e Note. 1040e The debtor does not assume the bankruptcy estate's administrative expense losses because they cannot be used by an individual taxpayer filing Form 1040. 1040e See Administrative expense loss, above. 1040e Passive and at-risk activities. 1040e   For bankruptcy cases beginning after November 8, 1992, passive activity carryover losses and credits and unused at-risk deductions are treated as tax attributes passing from the debtor to the bankruptcy estate, which the estate then passes back to the debtor when the bankruptcy estate terminates. 1040e Additionally, transfers to the debtor (other than by sale or exchange) of interests in passive or at-risk activities are treated as non-taxable exchanges. 1040e These transfers include the return of exempt property and abandonment of estate property to the debtor. 1040e Carrybacks from the debtor's activities. 1040e   The debtor cannot carry back any NOL or credit carryback from a tax year ending after the bankruptcy case has begun to any tax year ending before the case began. 1040e Carrybacks from the bankruptcy estate. 1040e   If the bankruptcy estate has an NOL that did not pass to the estate from the debtor under the attribute carryover rules, the estate can carry the loss back not only to its own earlier tax years but also to the debtor's tax years before the year the bankruptcy case began. 1040e The estate may also carry back excess credits, such as the general business credit, to the pre-bankruptcy tax years. 1040e Tax Reporting – Chapter 11 Cases Allocation of income and credits on information returns and required statement for returns for individual chapter 11 cases. 1040e    In chapter 11 cases, when an employer issues a Form W-2 reporting all of the debtor's wages, salary, or other compensation for a calendar year, and a portion of the earnings represent post-petition services includible in the estate's gross income, the Form W-2 amounts must be allocated between the estate and the debtor. 1040e The debtor-in-possession or trustee must allocate the income amount reported in box 1 and the income tax withheld reported in box 2 between the debtor and the estate. 1040e These allocations must reflect that the debtor's gross earnings from post-petition services and gross income from post-petition property are, generally, includible in the estate's gross income and not the debtor's gross income. 1040e The debtor and trustee may use a simple percentage method to allocate income and income tax withheld. 1040e The same method must be used to allocate the income and the withheld tax. 1040e Example. 1040e If 20% of the wages reported on Form W-2 for a calendar year were earned after the commencement of the case and are included in the estate's gross income, 20% of the withheld income tax reported on Form W-2 must also be claimed as a credit on the estate's income tax return. 1040e Likewise, 80% of wages must be reported by the debtor and 80% of the income tax withheld must be claimed as a credit on the debtor's income tax return. 1040e See IRC section 31(a). 1040e   If information returns are issued to the debtor for gross income, gross proceeds, or other reportable payments that should have been reported to the bankruptcy estate, the debtor-in-possession or trustee must allocate the improperly reported income in a reasonable manner between the debtor and the estate. 1040e In general, the allocation must ensure that any income and income tax withheld attributable to the post-petition period is reported on the estate's return, and any income and income tax withheld attributable to the pre-petition period is reported on the debtor's return. 1040e    IRS Notice 2006-83 requires the debtor to attach a statement to his or her individual income tax return (Form 1040) stating that the return is filed subject to a chapter 11 bankruptcy case. 1040e The statement must also: Show the allocations of income and income tax withheld, Describe the method used to allocate income and income tax withheld, and List the filing date of the bankruptcy case, the bankruptcy court in which the case is pending, the bankruptcy court case number, and the bankruptcy estate's EIN. 1040e Note. 1040e The debtor-in-possession or trustee must attach a similar statement to the bankruptcy estate's income tax return (Form 1041). 1040e   The model Notice 2006-83 Statement, shown above, may be used by debtors, debtors-in-possession, and trustees to satisfy the reporting requirement. 1040e Self-employment taxes in individual chapter 11 cases. 1040e   IRC section 1401 imposes a tax upon the self-employment income, that is, the net earnings from self-employment of an individual. 1040e Net earnings from self-employment are equal to the gross income derived by an individual from any trade or business carried on by such individual, less deductions attributable to the business. 1040e   Neither section 1115 of the Bankruptcy Code nor IRC section 1398 addresses the application of self-employment tax to the post-petition earnings of the individual debtor. 1040e Therefore, if the debtor continues to derive gross income from the performance of services as a self-employed individual after the commencement of the bankruptcy case, the debtor must continue to report the debtor's self-employment income on Schedule SE (Form 1040) of the debtor's income tax return. 1040e This schedule includes self-employment income earned post-petition and the attributable deductions. 1040e The debtor must pay any self-employment tax imposed by IRC section 1401. 1040e Employment taxes and employer's obligation to file Form W-2 in individual chapter 11 cases. 1040e   In chapter 11 cases, post-petition wages earned by a debtor are generally treated as gross income of the estate. 1040e However, section 1115 of the Bankruptcy Code (11 U. 1040e S. 1040e C. 1040e section 1115) does not affect the determination of what are deemed wages for Federal Insurance Contributions Act (FICA) tax, Federal Unemployment Tax Act (FUTA) tax, or Federal Income Tax Withholding purposes. 1040e See Notice 2006-83. 1040e   The reporting and withholding obligations of a debtor's employer also do not change. 1040e An employer should continue to report the wages and tax withholding on a Form W-2 issued under the debtor's name and social security number. 1040e Notice to persons required to file information returns (other than Form W-2, Wage and Tax Statement) in individual chapter 11 cases. 1040e   Within a reasonable time after the commencement of a chapter 11 bankruptcy case, the trustee or debtor-in-possession should provide notification of the bankruptcy estate's EIN to all persons (or entities) that are required to file information returns for the bankruptcy estate's gross income, gross proceeds, or other types of reportable payments. 1040e See IRC section 6109(a)(2). 1040e As these payments are the property of the estate under section 1115 of the Bankruptcy Code, the payors should report the gross income, gross proceeds, or other reportable payments on the appropriate information return using the estate's name and EIN as required under the IRC and regulations (see IRC sections 6041 through 6049). 1040e   The trustee or debtor-in-possession should not, however, provide the EIN to a person (or entity) filing Form W-2 reporting the debtor's wages or other compensation, as section 1115 of the Bankruptcy Code does not affect the determination of what constitutes wages for purposes of federal income tax withholding or FICA. 1040e See Notice 2006-83. 1040e An employer should continue to report all wage income and tax withholding, both pre-petition and post-petition, on a Form W-2 to the debtor under the debtor's social security number. 1040e   The debtor in a chapter 11 case is not required to file a new Form W-4 with an employer solely because the debtor filed a chapter 11 case and the post-petition wages are includible in the estate's income and not the debtor's income. 1040e However, a new Form W-4 may be necessary if the debtor is no longer entitled to claim the same number of allowances previously claimed because certain deductions or credits now belong to the estate. 1040e See Employment Tax Regulations section 31. 1040e 3402(f)(2)-1. 1040e Additionally, the debtor may wish to file a new Form W-4 to increase the income tax withheld from post-petition wages allocated to the estate to avoid having to make estimated tax payments for the estate. 1040e See IRC section 6654(a). 1040e Notice required in converted and dismissed cases. 1040e   When a chapter 11 bankruptcy case is closed, dismissed, or converted to a chapter 12 or 13 case, the bankruptcy estate ends as a separate taxable entity. 1040e The debtor should, within a reasonable time, send notice of such event to the persons (or entities) previously notified of the bankruptcy case. 1040e This helps to ensure that gross income, proceeds, and other reportable payments realized after the event are reported to the debtor under the correct TIN rather than to the estate. 1040e   When a chapter 11 case is converted to a chapter 7 case, the bankruptcy estate will continue to exist as a separate taxable entity. 1040e Gross income (other than post-conversion income from the debtor's services), gross proceeds, or other reportable payments should continue to be reported to the estate if they are property of the chapter 7 estate. 1040e However, income from services performed by the debtor after conversion of the case to chapter 7 is not property of the chapter 7 estate. 1040e After the conversion, the debtor should notify payors required to report the debtor's nonemployee compensation that compensation earned after the conversion should be reported using the debtor's name and TIN, not the estate's name and EIN. 1040e Employment taxes. 1040e   The trustee or debtor-in-possession must withhold income and social security taxes and file employment tax returns for any wages paid by the trustee or debtor, including wage claims paid as administrative expenses. 1040e See Publication 15, Circular E, Employer's Tax Guide, for details on employer tax responsibilities. 1040e   The trustee also has the duty to prepare and file Forms W-2 for wage claims paid by the trustee, regardless of whether the claims accrued before or during bankruptcy. 1040e For a further discussion of employment taxes, see Employment Taxes, later. 1040e Notice 2006-83 Statement Pending Bankruptcy Case The taxpayer, , filed a bankruptcy petition under chapter 11 of the Bankruptcy Code in the bankruptcy court for the District of . 1040e The bankruptcy court case number is . 1040e Gross income, and withheld federal income tax, reported on Form W-2, Forms 1099, Schedule K-1, and other information returns received under the taxpayer's name and social security number (or other taxpayer identification number) are allocated between the taxpayer's TIN and the bankruptcy estate's EIN as follows, using [describe allocation method]:. 1040e   Year Taxpayer   Estate 1. 1040e Form W-2, Payor: $   $     Withheld income tax shown on Form W-2 $   $   2. 1040e Form 1099-INT Payor: $   $     Withheld income tax (if any) shown on Form 1099-INT $   $   3. 1040e Form 1099-DIV Payor: $   $     Withheld income tax (if any) shown on Form 1099-DIV $   $   4. 1040e Form 1099-MISC Payor: $   $     Withheld income tax (if any) shown on Form 1099-MISC $   $   Bankruptcy Estate Tax Return Filing Requirements and Payment of Tax Due Filing Requirements Filing threshold. 1040e   If the bankruptcy estate has gross income that meets or exceeds the minimum amount required for filing, the trustee or debtor-in-possession must file an income tax return on Form 1041. 1040e This amount is equal to the sum of the personal exemption amount plus the basic standard deduction for a married individual filing separately. 1040e   For 2012, the threshold filing amount for a bankruptcy estate is $9,750 (the sum of the $3,800 personal exemption plus the $5,950 standard deduction for married individuals filing separately). 1040e   These amounts are generally adjusted annually. 1040e See the present year Form 1041 Instructions at www. 1040e irs. 1040e gov/form1041 for the current dollar amounts. 1040e Accounting period. 1040e   A bankruptcy estate may have a fiscal year. 1040e However, this period cannot be longer than 12 months. 1040e Change of accounting period. 1040e   The bankruptcy estate may change its accounting period (tax year) once without IRS approval. 1040e This rule allows the bankruptcy trustee to close the estate's tax year early, before the expected termination of the bankruptcy estate. 1040e The trustee can then file a return for the first short tax year to get a quick determination of the estate's tax liability. 1040e Employer identification number. 1040e   The trustee or debtor-in-possession must obtain an EIN for a bankruptcy estate. 1040e The trustee or debtor-in-possession uses this EIN on all tax returns filed for the bankruptcy estate with the IRS, including estimated tax returns. 1040e    The social security number of the individual debtor cannot be used as the EIN for the bankruptcy estate. 1040e   Obtain an EIN for a bankruptcy estate by applying: Online by clicking on the EIN link at www. 1040e irs. 1040e gov/businesses/small. 1040e The EIN is issued immediately once the application information is validated. 1040e By telephone at 1-800-829-4933 from 7:00 a. 1040e m. 1040e to 7:00 p. 1040e m. 1040e in the trustee's or debtor-in-possession's local time zone. 1040e Assistance provided to callers from Alaska and Hawaii will be based on the hours of operation in the Pacific time zone, or By mailing or faxing Form SS-4, Application for Employer Identification Number. 1040e   If the trustee or debtor-in-possession has not received the bankruptcy estate's EIN by the time the return is due, write “Applied for” and the date you applied in the space for the EIN. 1040e For more details, see Pub. 1040e 583, Starting a Business and Keeping Records. 1040e   Trustees representing ten or more bankruptcy estates (other than estates that will be filing employment or excise tax returns) may request a series or block of EINs. 1040e Figuring tax due. 1040e   The bankruptcy estate figures its taxable income the same way an individual figures taxable income. 1040e However, the estate uses the tax rates for a married individual filing separately to calculate the tax on its taxable income. 1040e The estate is entitled to one personal exemption and may either itemize deductions or take the basic standard deduction for a married individual filing a separate return. 1040e The estate cannot take the higher standard deduction allowed for married persons filing separately who are 65 or older or blind. 1040e Tax rate schedule. 1040e The tax on income for bankruptcy estates is calculated using the tax rate schedule for Married Individuals Filing Separately not the Estates and Trusts tax rate schedule. 1040e When to file. 1040e   Calendar year bankruptcy estates must file Form 1041 by April 15th. 1040e Fiscal year bankruptcy estates must file on or before the 15th day of the 4th month following the close of its tax year. 1040e For example, an estate that has a tax year that ends on June 30th must file Form 1041 by October 15th of the tax year. 1040e If the due date falls on a Saturday, Sunday, or legal holiday, file on the next business day. 1040e Note. 1040e The bankruptcy estate is allowed an automatic 6-month extension of time to file the bankruptcy estate tax return upon filing the required application, Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. 1040e Transmittal for Form 1040. 1040e   Form 1041 is used as a transmittal for Form 1040. 1040e If a return is required, the trustee or debtor-in-possession must complete the identification area at the top of Form 1041 and indicate the chapter under which the bankruptcy estate filed, either chapter 7 or chapter 11. 1040e   Prepare the bankruptcy estate's return by completing Form 1040. 1040e In the top margin of Form 1040, write “Attachment to Form 1041 —DO NOT DETACH. 1040e ” Then, attach Form 1040 to the Form 1041 transmittal. 1040e Enter the tax and payment amounts on lines 23 through 29 of Form 1041, then sign and date the return. 1040e An example of a bankruptcy estate's tax return is prepared below. 1040e Note. 1040e The filing of the bankruptcy estate's tax return does not relieve a debtor from the requirement to file his or her individual tax return on Form 1040. 1040e Payment of Tax Due Payment methods. 1040e   Payment of tax due may be made by check or money order or by credit or debit card. 1040e For information on how to make payments electronically by credit or debit card, go to irs. 1040e gov/e-pay. 1040e      Payments may also be made electronically using the Electronic Federal Tax Payment System (EFTPS), a free tax payment system that allows you to make payments online or by phone. 1040e To enroll in EFTPS, go to eftps. 1040e gov or call 1-800-555-4477. 1040e For more information see Publication 966, Electronic Federal Tax Payment System: A Guide to Getting Started. 1040e Payment voucher – Form 1041-V. 1040e   Form 1041-V accompanies payments made by check or money order for Form 1041. 1040e The voucher includes information about the bankruptcy estate, including the name of the bankruptcy estate, trustee, EIN, and amount due. 1040e Using Form 1041-V assists the IRS in processing the payment more accurately and efficiently. 1040e We recommend the use of Form 1041-V; however, there is no penalty if the voucher is not used. 1040e Estimated tax – Form 1041-ES. 1040e   In most cases, the trustee or debtor-in-possession must pay any required estimated tax due for the bankruptcy estate. 1040e See the Form 1041-ES Instructions for information on the minimum threshold amount required for filing Form 1041-ES, paying the estimated tax, and exceptions to filing. 1040e Employment Taxes The trustee or debtor-in-possession must withhold income and social security taxes and file employment tax returns for any wages paid by the trustee or debtor, including wage claims paid as administrative expenses. 1040e Until these employment taxes are deposited as required by the IRC, they should be set aside in a separate bank account to ensure that funds are available to satisfy the liability. 1040e If the employment taxes are not paid as required, the trustee may be held personally liable for payment of the taxes. 1040e   See Publication 15, (Circular E), Employer's Tax Guide, for details on employer tax responsibilities. 1040e Also see IRS Notice 931, Deposit Requirements for Employment Taxes, for details on the deposit rules, including the requirement that federal employment tax deposits be made by electronic funds transfer. 1040e The trustee also has a duty to prepare and file Forms W-2, Wage and Tax Statement, for wage claims paid by the trustee, regardless of whether the claims accrued before or during bankruptcy. 1040e If the debtor fails to prepare and file Forms W-2 for wages paid before bankruptcy, the trustee should instruct the employees to file a Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 1040e , with their individual income tax returns. 1040e Tax Return Example – Form 1041 This publication is not revised annually. 1040e Future changes to the forms and their instructions may not be reflected in this example. 1040e Note. 1040e The following return was prepared for tax year 2011. 1040e In 2011, the threshold filing amount for a bankruptcy estate was $9,500 (the sum of the $3,700 personal exemption plus the $5,800 standard deduction for married individuals filing separately). 1040e Facts and circumstances. 1040e   On December 15, 2010, Thomas Smith filed a bankruptcy petition under chapter 7. 1040e Joan Black was appointed trustee to administer the bankruptcy estate and to distribute the assets. 1040e   The estate received the following assets from Mr. 1040e Smith: A $100,000 certificate of deposit, Commercial rental real estate with a fair market value (FMV) of $280,000, and His personal residence with an FMV of $200,000. 1040e   Also, the estate received a $251,500 capital loss carryover. 1040e   Mr. 1040e Smith's bankruptcy case was closed on December 31, 2011. 1040e During 2011, Mr. 1040e Smith was relieved of $70,000 of debt by the bankruptcy court. 1040e The estate chose a calendar year as its tax year. 1040e Joan, the trustee, reviews the estate's transactions and reports the taxable events on the estate's final return. 1040e Schedule B (Form 1040). 1040e    The certificate of deposit earned $5,500 of interest during 2011. 1040e Joan reports this interest on Schedule B. 1040e She completes this schedule and enters the result on Form 1040. 1040e Form 4562. 1040e   Joan enters the depreciation allowed on Form 4562. 1040e She completes the form and enters the result on Schedule E. 1040e Schedule E (Form 1040). 1040e   The commercial real estate was rented through the date of sale. 1040e Joan reports the income and expenses on Schedule E. 1040e She enters the net income on Form 1040. 1040e Form 4797. 1040e   The commercial real estate was sold on July 1, 2011, for $280,000. 1040e The property was purchased in 2001 at a cost of $250,000. 1040e The total depreciation allowable as of the date of sale was $120,000. 1040e Additionally, $25,000 of selling expenses were incurred. 1040e Joan reports the gain or loss from the sale on Form 4797. 1040e She completes the form and enters the gain on Schedule D (Form 1040). 1040e   Mr. 1040e Smith's former residence was sold on September 30, 2011. 1040e The sale price was $200,000, the selling expenses were $20,000, and his adjusted basis was $130,000. 1040e This sale is excluded from gross income under IRC section 121. 1040e Note. 1040e Gains from the sale of personal residences are excluded from gross income up to $250,000 under IRC section 121 ($500,000 for married couples filing a joint return). 1040e Bankruptcy estates succeed to this exclusion at the commencement of the case. 1040e See Regulation section 1. 1040e 1398-3. 1040e Schedule D (Form 1040). 1040e   Joan completes Schedule D, taking into account the $250,000 capital loss carryover from 2010 ($251,500 transferred to the estate minus $1,500 used on the estate's 2010 return). 1040e She enters the results on Form 1040. 1040e Form 1040, page 1. 1040e   Joan completes page 1 of the Form 1040 and enters the adjusted gross income on the first line of Form 1040, page 2. 1040e Schedule A (Form 1040). 1040e   During 2011, the estate paid mortgage interest and real property tax on Mr. 1040e Smith's former residence. 1040e It also paid income tax to the state. 1040e Joan enters the mortgage interest, real estate tax, and income tax on Schedule A. 1040e Also, she reports the bankruptcy estate's administrative expenses as a miscellaneous deduction not subject to the 2% floor on miscellaneous itemized deductions. 1040e She completes the Schedule A and enters the result on page 2 of Form 1040. 1040e Form 1040, page 2. 1040e   Joan determines the estate's taxable income and figures its tax using the tax rate schedule for married filing separately. 1040e She then enters the estate's estimated tax payments and figures the amount the estate still owes. 1040e Form 982. 1040e   Joan completes the Schedule D Tax Worksheet to figure the capital loss carryover. 1040e Because $70,000 of debt was canceled, Joan must reduce the tax attributes of the estate by the amount of the canceled debt. 1040e See Debt Cancellation, later. 1040e After the bankruptcy case ends, Mr. 1040e Smith will assume the estate's tax attributes. 1040e Mr. 1040e Smith will assume a capital loss carryover of $53,500 ($123,500 carryover minus the $70,000 attribute reduction) for use in preparation of his individual tax return (Form 1040). 1040e Note. 1040e If the bankruptcy estate had continued, the capital loss carryover would be available to the bankruptcy estate for the 2012 tax year. 1040e Form 1041. 1040e   Joan enters the total tax, estimated tax payments, and tax due from Form 1040 on Form 1041. 1040e She completes the identification area at the top of Form 1041, then signs and dates the return as the trustee on behalf of the bankruptcy estate. 1040e This image is too large to be displayed in the current screen. 1040e Please click the link to view the image. 1040e Sample Form 1040 - page 1 This image is too large to be displayed in the current screen. 1040e Please click the link to view the image. 1040e Sample Form 1040 - page 2 This image is too large to be displayed in the current screen. 1040e Please click the link to view the image. 1040e Sample Schedule A This image is too large to be displayed in the current screen. 1040e Please click the link to view the image. 1040e Sample Schedule B This image is too large to be displayed in the current screen. 1040e Please click the link to view the image. 1040e Sample Schedule D This image is too large to be displayed in the current screen. 1040e Please click the link to view the image. 1040e Sample Schedule E This image is too large to be displayed in the current screen. 1040e Please click the link to view the image. 1040e Sample Form 4797 - page 1 This image is too large to be displayed in the current screen. 1040e Please click the link to view the image. 1040e Sample Form 2119 This image is too large to be displayed in the current screen. 1040e Please click the link to view the image. 1040e Sample Form 4797 - page 2 This image is too large to be displayed in the current screen. 1040e Please click the link to view the image. 1040e Sample Form 4562 This image is too large to be displayed in the current screen. 1040e Please click the link to view the image. 1040e Sample Capital Loss Carryover Worksheet This image is too large to be displayed in the current screen. 1040e Please click the link to view the image. 1040e Sample Form 982 Capital Loss Carryover Worksheet—Lines 6 and 14 Use this worksheet to figure your capital loss carryovers from 2010 to 2011 if your 2010 Schedule D, line 21, is a loss and (a) that loss is a smaller loss than the loss on your 2010 Schedule D, line 16, or (b) the amount on your 2010 Form 1040, line 41 (or your 2010 Form 1040NR, line 38, if applicable) is less than zero. 1040e Otherwise, you do not have any carryovers. 1040e 1. 1040e Enter the amount from your 2010 Form 1040, line 41, or Form 1040NR, line 38. 1040e If a loss, enclose the amount in parentheses 1. 1040e 19,880   2. 1040e Enter the loss from your 2010 Schedule D, line 21, as a positive amount 2. 1040e 1,500   3. 1040e Combine lines 1 and 2. 1040e If zero or less, enter -0- 3. 1040e 21,380   4. 1040e Enter the smaller of line 2 or line 3 4. 1040e 1,500     If line 7 of your 2010 Schedule D is a loss, go to line 5; otherwise, enter -0- on line 5 and go to line 9. 1040e       5. 1040e Enter the loss from your 2010 Schedule D, line 7, as a positive amount 5. 1040e 0   6. 1040e Enter any gain from your 2010 Schedule D, line 15. 1040e If a loss, enter -0- 6. 1040e         7. 1040e Add lines 4 and 6 7. 1040e 1,500   8. 1040e Short-term capital loss carryover for 2011. 1040e Subtract line 7 from line 5. 1040e If zero or less, enter -0-. 1040e If more than zero, also enter this amount on Schedule D, line 6 8. 1040e 0     If line 15 of your 2010 Schedule D is a loss, go to line 9; otherwise, skip lines 9 through 13. 1040e       9. 1040e Enter the loss from your 2010 Schedule D, line 15, as a positive amount 9. 1040e 251,500   10. 1040e Enter any gain from your 2010 Schedule D, line 7. 1040e If a loss, enter -0- 10. 1040e 0       11. 1040e Subtract line 5 from line 4. 1040e If zero or less, enter -0- 11. 1040e 1,500       12. 1040e Add lines 10 and 11 12. 1040e 1,500   13. 1040e Long-term capital loss carryover for 2011. 1040e Subtract line 12 from line 9. 1040e If zero or less, enter -0-. 1040e If more than zero, also enter this amount on Schedule D, line 14 13. 1040e 250,000                       Partnerships and Corporations Filing Requirements A separate taxable estate is not created when a partnership or corporation files a bankruptcy petition and their tax return filing requirements do not change. 1040e The debtor-in-possession, court appointed trustee, assignee, or receiver must file the entity's income tax returns on Form 1065, Form 1120 or, Form 1120S. 1040e In cases where a trustee or receiver is not appointed, the debtor-in-possession continues business operations and remains in possession of the business' property during the bankruptcy proceeding. 1040e The debtor-in-possession, rather than the general partner of a partnership or corporate officer of a corporation, assumes the fiduciary responsibility to file the business' tax returns. 1040e Partnerships The filing requirements for a partnership in a bankruptcy proceeding do not change. 1040e However, the responsibility to file the required returns becomes that of the court appointed trustee, receiver, or debtor-in-possession. 1040e A partnership's debt that is canceled as a result of the bankruptcy proceeding is not included in the partnership's income. 1040e However, It may or may not be included in the individual partners' income. 1040e See Partnerships, below under Debt Cancellation. 1040e Corporations The filing requirements for a corporation in a bankruptcy proceeding also do not change. 1040e A bankruptcy trustee, receiver, or debtor-in-possession, having possession of or holding title to substantially all of the property or business operations of the debtor corporation, must file the debtor's corporate income tax return for the tax year. 1040e The following discussion only highlights bankruptcy tax rules applying to corporations. 1040e The complex details of corporate bankruptcy reorganizations are beyond the scope of this publication. 1040e Therefore, you may wish to seek the help of a professional tax advisor. 1040e See Corporations under Debt Cancellation for information about a corporation's debt canceled in a bankruptcy proceeding. 1040e Tax-Free Reorganizations The tax-free reorganization provisions of the Internal Revenue Code allow a corporation to transfer all or part of its assets to another corporation in a bankruptcy under title 11 of the United States Code or in a similar case. 1040e However, under the reorganization plan, the stock or securities of the corporation to which the assets are transferred must be distributed in a transaction that qualifies under IRC section 354, 355, or 356. 1040e A “similar case” includes a receivership, foreclosure, or other similar proceeding in a federal or state court. 1040e In these cases, any party to the reorganization must be under the jurisdiction of the court and the transfer of assets under the plan of reorganization must be approved by the court. 1040e In a receivership, foreclosure, or similar proceeding before a federal or state agency involving certain financial institutions, the agency is treated as a court. 1040e Generally, IRC section 354 provides that no gain or loss is recognized if a corporation's stock is exchanged solely for stock or securities in a corporation that is a party to the reorganization under a qualifying reorganization plan. 1040e In this case, shareholders in the bankrupt corporation would recognize no gain or loss if they exchange their stock solely for stock or securities of the corporation acquiring the bankrupt corporation's assets. 1040e IRC section 355 generally provides that no gain or loss is recognized by a shareholder if a corporation distributes solely stock or securities of another corporation that the distributing corporation controls immediately before the distribution. 1040e IRC section 356 allows tax-free exchanges in situations that would qualify under IRC section 354 or 355, except that other property or money, in addition to the permitted stock or securities, is received by the shareholder. 1040e In this situation, gain is recognized by the shareholder, but only to the extent of the money and the FMV of the other property received. 1040e No loss is recognized in this situation. 1040e Exemption from tax return filing A trustee, receiver, or assignee of a corporation in bankruptcy, receivership, or in the process of dissolving, may apply to the IRS for relief from filing federal income tax returns for the corporation. 1040e To qualify, the corporation must have ceased business operations and have no assets nor income for the tax year. 1040e The exemption request must be submitted to the local IRS Insolvency Office handling the case. 1040e The request to the IRS must include the name, address, and EIN of the corporation and a statement of the facts (with any supporting documents) showing why the debtor needs relief from the filing requirements. 1040e The request must also include the following statement: “I hereby request relief from filing federal income tax returns for tax years ending _____ for the above-named corporation and declare under penalties of perjury that to the best of my knowledge and belief the information contained herein is correct. 1040e ” The statement must be signed by the trustee, receiver or assignee. 1040e The statement must also include notice of appointment to act on behalf of the corporation (this is not required for bankruptcy trustees or debtors-in-possession). 1040e The IRS will act on your request within 90 days. 1040e Disclosure of return information to trustee. 1040e   Upon written request, current and earlier returns of the debtor are open to inspection by or disclosure to the trustee or receiver. 1040e However, in bankruptcy cases other than those of individuals filing under chapter 7 or 11, such as a corporate bankruptcy, the IRS must find that the trustee has a material interest that will be affected by information on the return. 1040e Material interest is generally defined as a financial or monetary interest. 1040e Material interest is not limited to the trustee's responsibility to file a return on behalf of the bankruptcy estate. 1040e Receiverships Court-established receiverships sometimes arise in connection with bankruptcies. 1040e Certain court-established receiverships should be treated as qualified settlement funds ("QSFs") for purposes of IRC section 468B and the underlying Treasury Regulations. 1040e QSFs are required to file an annual income tax return, Form 1120-SF, U. 1040e S. 1040e Income Tax Return for Settlement Funds. 1040e More information about QSFs may be found in Treasury Regulation sections 1. 1040e 468B-1 through -5. 1040e Determination of Tax The determination of the proper amount of tax due for a tax year begins with the bankruptcy estate's filing of Form 1041, and the individual debtor's filing of Form 1040, or for bankrupt entities filing Forms 1065, 1120, or 1120S. 1040e After a return is filed, the IRS will either accept the return as filed or select the return for examination. 1040e Under examination the IRS may redetermine the tax liability shown on the return. 1040e If the bankruptcy estate or debtor disagrees with the redetermined tax due, the tax as redetermined by the IRS may be contested in the bankruptcy court, or Tax Court, as applicable. 1040e See Court Jurisdiction over Tax Matters, later. 1040e Prompt Determination Requests Pursuant to Rev. 1040e Proc. 1040e 2006-24, 2006-22 I. 1040e R. 1040e B. 1040e 943, www. 1040e irs. 1040e gov/irb/2006-22_IRB/ar12, as modified by Announcement 2011-77, www. 1040e irs. 1040e gov/irb/2011-51_IRB/ar13, the bankruptcy trustee may request a determination of any unpaid tax liability incurred by the bankruptcy estate during the administration of the case, by filing a tax return and a request for such determination with the IRS. 1040e Unless the return is fraudulent or contains a material misrepresentation, the estate, trustee, debtor, and any successor to the debtor are discharged from liability upon payment of the tax: As determined by the IRS, As determined by the bankruptcy court, after completion of the IRS examination, or As shown on the return, if the IRS does not: Notify the trustee within 60 days after the request for determination that the return has been selected for examination, or Complete the examination and notify the trustee of any tax due within 180 days after the request (or any additional time permitted by the bankruptcy court). 1040e Making the request for determination. 1040e   As detailed in Rev. 1040e Proc. 1040e 2006-24, as modified by Announcement 2011-77, to request a prompt determination of any unpaid tax liability of the estate, the trustee must file a signed written request, in duplicate, with the Internal Revenue Service, Centralized Insolvency Operation, P. 1040e O. 1040e Box 7346, Philadelphia, PA 19101–7346 (marked “Request for Prompt Determination”). 1040e   The request must be submitted in duplicate and must be executed under penalties of perjury. 1040e In addition, the trustee must submit along with the request an exact copy of the return(s) filed by the trustee with the IRS for each completed tax period. 1040e The request must contain the following information: A statement indicating that it is a Request for Prompt Determination of Tax Liability, specifying the type of return and tax period for each return being filed. 1040e The name and location of the office where the return was filed. 1040e The name of the debtor. 1040e Debtor's social security number, TIN, or EIN. 1040e Type of bankruptcy estate. 1040e Bankruptcy case number. 1040e Court where the bankruptcy case is pending. 1040e   The copy of the return(s) submitted with the request must be an exact copy of a valid return. 1040e A request for prompt determination will be considered incomplete and returned to the trustee if it is filed with a copy of a document that does not qualify as a valid return. 1040e    To qualify as valid, a return must meet certain criteria, including a signature under penalties of perjury. 1040e A document filed by the trustee with the jurat stricken, deleted, or modified will not qualify as a valid return. 1040e Examination of return. 1040e   The IRS will notify the trustee within 60 days from receipt of the request whether the return filed by the trustee has been selected for examination or has been accepted as filed. 1040e If the return is selected for examination, it will be examined as soon as possible. 1040e The IRS will notify the trustee of any tax due within 180 days from receipt of the application or within any additional time permitted by the bankruptcy court. 1040e   If a prompt determination request is incomplete, all the documents received by the IRS will be returned to the trustee by the assigned Field Insolvency Office with an explanation identifying the missing item(s) and instructions to re-file the request once corrected. 1040e   Once corrected, the request must be filed with the IRS at the Field Insolvency Office address specified in the correspondence accompanying the returned incomplete request. 1040e   In the case of an incomplete request submitted with a copy of an invalid return document, the trustee must file a valid original return with the appropriate IRS office and submit a copy of that return with the corrected request when the request is re-filed. 1040e Note. 1040e An incomplete request includes those submitted with a copy of a return form, the original of which does not qualify as a valid return. 1040e   The 60-day period to notify the trustee whether the return is accepted as filed or has been selected for examination does not begin to run until a complete request package is recei
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The 1040e

1040e 17. 1040e   How To Get Tax Help Table of Contents Go online, use a smart phone, call or walk in to an office near you. 1040e Whether it's help with a tax issue, preparing your tax return or picking up a free publication or form, get the help you need the way you want it. 1040e Free help with your tax return. 1040e   Free help in preparing your return is available nationwide from IRS-certified volunteers. 1040e The Volunteer Income Tax Assistance (VITA) program is designed to help low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers. 1040e The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. 1040e Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. 1040e Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. 1040e To find the nearest VITA or TCE site, visit IRS. 1040e gov or call 1-800-906-9887. 1040e   As part of the TCE program, AARP offers the Tax-Aide counseling program. 1040e To find the nearest AARP Tax-Aide site, visit AARP's website at www. 1040e aarp. 1040e org/money/taxaide or call 1-888-227-7669. 1040e   For more information on these programs, go to IRS. 1040e gov and enter “VITA” in the search box. 1040e Internet. 1040e IRS. 1040e gov and IRS2Go are ready when you are — every day, every night, 24 hours a day, 7 days a week. 1040e Apply for an Employer Identification Number (EIN). 1040e Go to IRS. 1040e gov and enter Apply for an EIN in the search box. 1040e Request an Electronic Filing PIN by going to IRS. 1040e gov and entering Electronic Filing PIN in the search box. 1040e Download forms, instructions, and publications, including some accessible versions. 1040e Order free transcripts of your tax returns or tax account using the Order a Transcript tool on IRS. 1040e gov or IRS2Go. 1040e Tax return and tax account transcripts are generally available for the current year and past three years. 1040e Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS. 1040e gov or IRS2Go. 1040e Stop by most business days for face-to-face tax help, no appointment necessary — just walk in. 1040e An employee can explain IRS letters, request adjustments to your tax account or help you set up a payment plan. 1040e Before you visit, check the Office Locator for the address, phone number, hours of operation and the services provided. 1040e If you have an ongoing tax account problem or a special need, such as a disability, you can request an appointment. 1040e Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. 1040e Locate the nearest volunteer help site with the VITA Locator Tool on IRS. 1040e gov. 1040e Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. 1040e The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. 1040e Most VITA and TCE sites offer free electronic filing and some provide IRS-certified volunteers who can help prepare your tax return. 1040e AARP offers the Tax-Aide counseling program as part of the TCE program. 1040e Visit AARP's website to find the nearest Tax-Aide location. 1040e Research your tax questions. 1040e Search publications and instructions by topic or keyword. 1040e Read the Internal Revenue Code, regulations, or other official guidance. 1040e Read Internal Revenue Bulletins. 1040e Sign up to receive local and national tax news by email. 1040e Phone. 1040e You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. 1040e   Call the Business and Specialty Tax line for questions at 1-800-829-4933. 1040e Download the free IRS2Go mobile app from the iTunes app store or from Google Play. 1040e Use it to watch the IRS YouTube channel, get IRS news as soon as it's released to the public, order transcripts of your tax returns or tax account, check your refund status, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. 1040e Call to locate the nearest volunteer help site, 1-800-906-9887. 1040e Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. 1040e The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. 1040e Most VITA and TCE sites offer free electronic filing. 1040e Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. 1040e Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. 1040e Call to order forms, instructions and publications, 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions and publications, and prior-year forms and instructions (limited to 5 years). 1040e You should receive your order within 10 business days. 1040e Call to order transcripts of your tax returns or tax account, 1-800-908-9946. 1040e Follow the prompts to provide your Employer Identification Number, street address and ZIP code. 1040e Call for TeleTax topics, 1-800-829-4477, to listen to pre-recorded messages covering various tax topics. 1040e Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. 1040e The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. 1040e These individuals can also contact the IRS through relay services such as the Federal Relay Service available at www. 1040e gsa. 1040e gov/fedrelay. 1040e Walk-in. 1040e You can find a selection of forms, publications and services — in-person, face-to-face. 1040e   Products. 1040e You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. 1040e Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. 1040e Services. 1040e You can walk in to your local TAC most business days for personal, face-to-face tax help. 1040e An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. 1040e If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. 1040e No appointment is necessary—just walk in. 1040e Before visiting, check www. 1040e irs. 1040e gov/localcontacts for hours of operation and services provided. 1040e Mail. 1040e You can send your order for forms, instructions, and publications to the address below. 1040e You should receive a response within 10 days after your request is received. 1040e  Internal Revenue Service 1201 N. 1040e Mitsubishi Motorway Bloomington, IL 61705-6613 The Taxpayer Advocate Service Is Here to Help You. 1040e   The Taxpayer Advocate Service (TAS) is your voice at the IRS. 1040e Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. 1040e What can TAS do for you?   We can offer you free help with IRS problems that you can't resolve on your own. 1040e We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. 1040e You face (or your business is facing) an immediate threat of adverse action. 1040e You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. 1040e   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. 1040e Here's why we can help: TAS is an independent organization within the IRS. 1040e Our advocates know how to work with the IRS. 1040e Our services are free and tailored to meet your needs. 1040e We have offices in every state, the District of Columbia, and Puerto Rico. 1040e How can you reach us?   If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. 1040e irs. 1040e gov/advocate, or call us toll-free at 1-877-777-4778. 1040e How else does TAS help taxpayers?   TAS also works to resolve large-scale, systemic problems that affect many taxpayers. 1040e If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. 1040e irs. 1040e gov/sams. 1040e Low Income Taxpayer Clinics. 1040e   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. 1040e Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. 1040e Visit www. 1040e TaxpayerAdvocate. 1040e irs. 1040e gov or see IRS Publication 4134, Low Income Taxpayer Clinic List. 1040e Small Business and Self-Employed Tax Center. 1040e This online guide is a must for every small business owner or any taxpayer about to start a business. 1040e  The information is updated during the year. 1040e Visit www. 1040e irs. 1040e gov/Businesses/Small-Businesses-&-Self-Employed. 1040e Prev  Up  Next   Home   More Online Publications