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E file irs 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). E file irs Low Income Taxpayer Clinics (LITCs). E file irs 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. E file irs All such federal tax returns must be filed with the IRS before the date first set for the first meeting of creditors. E file irs 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). E file irs After notice and hearing, the bankruptcy court may extend the period for another 30 days. E file irs 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. E file irs Note. E file irs Individual debtors should use their home address when filing Form 1040 with the IRS. E file irs Returns should not be filed “in care of” the trustee's address. E file irs Ordering tax transcripts and copies of returns. E file irs   Trustees may require the debtor to submit copies or transcripts of the debtor's returns as proof of filing. E file irs 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. E file irs If requested through ADS, the transcript will be mailed to the debtor's most current address according to the IRS's records. E file irs 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. E file irs Transcripts are normally mailed within 10 to 15 days of receipt of the request by the IRS. E file irs A transcript contains most of the information on the debtor's filed return, but it is not a copy of the return. E file irs To request a copy of the debtor's filed return, file Form 4506, Request for Copy of Tax Return. E file irs 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. E file irs 00 per tax return for copies of the returns. E file irs 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. E file irs 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. E file irs Tax returns and payment of taxes in chapter 11 cases. E file irs   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. E file irs Disclosure of debtor's return information to trustee. E file irs   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. E file irs 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. E file irs    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. E file irs Material interest is generally defined as a financial or monetary interest. E file irs Material interest is not limited to the trustee's responsibility to file a return on behalf of the bankruptcy estate. E file irs   However, the U. E file irs S. E file irs 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. E file irs Disclosure of bankruptcy estate's return information to debtor. E file irs    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. E file irs 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. E file irs Individuals in Chapter 12 or 13 Only individuals may file a chapter 13 bankruptcy. E file irs Chapter 13 relief is not available to corporations or partnerships. E file irs 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. E file irs 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. E file irs S. E file irs Individual Income Tax Return. E file irs On the debtor's individual tax return, Form 1040, report all income received during the entire year and deduct all allowable expenses. E file irs Do not include in income the amount from any debt canceled due to the debtor's bankruptcy. E file irs 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. E file irs See Debt Cancellation, later. E file irs Interest on trust accounts in chapter 13 cases. E file irs   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. E file irs This interest is not available to either the debtor or creditors, it is available only to the trustee for use by the U. E file irs S. E file irs Trustee system. E file irs The interest is also not taxable to the trustee as income. E file irs 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. E file irs The bankruptcy estate in a chapter 7 case is represented by a trustee. E file irs The trustee is appointed to administer the estate and liquidate any nonexempt assets. E file irs In chapter 11 cases, the debtor often remains in control of the assets as a “debtor-in-possession” and acts as the bankruptcy trustee. E file irs However, the bankruptcy court, for cause, may appoint a trustee if such appointment is in the best interests of the creditors and the estate. E file irs During the chapter 7 or 11 bankruptcy, the debtor continues to file an individual tax return on Form 1040. E file irs The bankruptcy trustee files a Form 1041 for the bankruptcy estate. E file irs 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). E file irs 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. E file irs Two separate bankruptcy estate income tax returns must be filed (if each spouse separately meets the filing requirements). E file irs 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. E file irs Debtor's Election To End Tax Year – Form 1040 Short tax years. E file irs   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. E file irs If the debtor makes this election, the debtor's tax year is divided into 2 short tax years of less than 12 months each. E file irs The first tax year ends on the day before the commencement date and the second tax year begins on the commencement date. E file irs   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. E file irs Also, the tax liability for the first short tax year is not subject to discharge under the Bankruptcy Code. E file irs    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. E file irs 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. E file irs Note. E file irs The debtor cannot make a short tax year election if no assets, other than exempt property, are in the bankruptcy estate. E file irs Making the Election - Filing Requirements First short tax year. E file irs   The debtor can elect to end the debtor's tax year by filing a return on Form 1040 for the first short tax year. E file irs The return must be filed on or before the 15th day of the fourth full month after the end of that first tax year. E file irs Second short tax year. E file irs   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. E file irs   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. E file irs To avoid delays in processing the return, write “Second Short Year Return After Section 1398 Election” at the top of the return. E file irs Example. E file irs Jane Doe, an individual calendar year taxpayer, filed a bankruptcy petition under chapter 7 or 11 on May 8, 2012. E file irs 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. E file irs Jane's second short year runs from May 8, 2012, through December 31, 2012. E file irs 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. E file irs To avoid delays in processing the return, write “Section 1398 Election” at the top of the return. E file irs The debtor may also make the election by attaching a statement to Form 4868, Automatic Extension of Time to File an U. E file irs S. E file irs Individual Tax Return. E file irs 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. E file irs The debtor must file Form 4868 by the due date of the return for the first short tax year. E file irs The debtor's spouse may also elect to close his or her tax year, see Election by debtor's spouse, below. E file irs Election by debtor's spouse. E file irs   If the debtor is married, the debtor's spouse may join in the election to end the tax year. E file irs If the debtor and spouse make a joint election, the debtor must file a joint return for the first short tax year. E file irs The debtor must elect by the due date for filing the return for the first short tax year. E file irs Once the election is made, it cannot be revoked for the first short tax year. E file irs However, the election does not prevent the debtor and the spouse from filing separate returns for the second short tax year. E file irs Later bankruptcy of spouse. E file irs    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. E file irs   As each spouse has a separate bankruptcy, one or both of them may have 3 short tax years in the same calendar year. E file irs 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. E file irs 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. E file irs The debtor and the spouse are precluded from this election because they have different tax years. E file irs 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. E file irs Example 1. E file irs Paul and Mary Harris are calendar-year taxpayers. E file irs Paul's voluntary chapter 7 bankruptcy case begins on March 4. E file irs If Paul does not make an election, his tax year does not end on March 3. E file irs If he makes an election, Paul's first tax year is January 1–March 3, and his second tax year begins on March 4. E file irs Mary could join in Paul's election as long as they file a joint return for the tax year January 1–March 3. E file irs They must make the election by July 15, the due date for filing the joint return. E file irs Example 2. E file irs Fred and Ethel Barnes are calendar-year taxpayers. E file irs Fred's voluntary chapter 7 bankruptcy case begins on May 6, and Ethel's bankruptcy case begins on November 1 of the same year. E file irs Ethel could elect to end her tax year on October 31. E file irs 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. E file irs Her first tax year is January 1–October 31, and her second year is November 1–December 31. E file irs 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. E file irs 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. E file irs Fred and Ethel cannot file a joint return for that short tax year because their tax years preceding October 31 were not the same. E file irs Example 3. E file irs Jack and Karen Thomas are calendar-year taxpayers. E file irs 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. E file irs Karen elected to close her tax year on April 9 and Jack joins in Karen's election. E file irs 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. E file irs The first tax year would be January 1–April 9; the second, April 10–October 2; and the third, October 3–December 31. E file irs Karen may join in Jack's election if they file a joint return for the second short tax year (April 10–October 2). E file irs If Karen does join in, she would have the same 3 short tax years as Jack. E file irs 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. E file irs Annualizing taxable income. E file irs   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. E file irs 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. E file irs Dismissal of bankruptcy case. E file irs   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. E file irs It is as if no bankruptcy estate was created for tax purposes. E file irs 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. E file irs Income, deductions, and credits previously reported by the bankruptcy estate must be reported on the debtor's amended returns. E file irs Attach a statement to the amended returns explaining why the debtor is filing an amended return. E file irs Taxes and the Bankruptcy Estate Property of the bankruptcy estate. E file irs   At the commencement of a bankruptcy case a bankruptcy estate is created. E file irs Bankruptcy law determines which of the debtor's assets become part of a bankruptcy estate. E file irs This estate generally includes all of the debtor's legal and equitable interests in property as of the commencement date. E file irs However, there are exceptions and certain property is exempted or excluded from the bankruptcy estate. E file irs Note. E file irs Exempt property and abandoned property are initially part of the bankruptcy estate, but are subsequently removed from the estate. E file irs Excluded property is never included in the estate. E file irs Transfer of assets between debtor and bankruptcy estate. E file irs   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. E file irs The transfer does not result in gain or loss, acceleration of income or deductions, or recapture of deductions or credits. E file irs For example, the transfer of an installment obligation to the estate would not accelerate gain under the rules for reporting installment sales. E file irs The estate assumes the same basis, holding period, and character of the transferred assets. E file irs Also, the estate generally accounts for the transferred assets in the same manner as debtor. E file irs   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. E file irs The transfer does not result in gain or loss, acceleration of income or deductions, or recapture of deductions or credits to the estate. E file irs Abandoned property. E file irs    The abandonment of property by the estate to the debtor is a nontaxable disposition of property. E file irs If the debtor received abandoned property from the bankruptcy estate, the debtor assumes the same basis in the property that the bankruptcy estate had. E file irs Separate taxable entity. E file irs   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. E file irs 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. E file irs S. E file irs Income Tax Return for Estates and Trusts, and paying its taxes. E file irs The debtor remains responsible for filing his or her own returns on Form 1040, U. E file irs S. E file irs Individual Income Tax Return, and paying taxes on income that does not belong to the estate. E file irs Employer identification number. E file irs   The trustee or debtor-in-possession must obtain an EIN for a bankruptcy estate. E file irs 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. E file irs See Employer identification number, under Bankruptcy Estate Tax Return Filing Requirements and Payment of Tax Due, later. E file irs    The social security number of the individual debtor cannot be used as the EIN for the bankruptcy estate. E file irs Income, deductions, and credits – Form 1040. E file irs   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). E file irs Also, do not include as income on the debtor's return the amount of any debt canceled by reason of the bankruptcy discharge. E file irs 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. E file irs See Debt Cancellation, below. E file irs Note. E file irs The debtor may not be able to claim certain deductions available to the bankruptcy estate such as administrative expenses. E file irs 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. E file irs However, other exclusions, such as the insolvency exclusion, may apply. E file irs Bankruptcy Estate – Income, Deductions, and Credits Bankruptcy Estate Income Income of the estate in individual chapter 7 cases. E file irs    The gross income of the bankruptcy estate includes gross income of the debtor to which the estate is entitled under the Bankruptcy Code. E file irs Gross income also includes income generated by the bankruptcy estate from property of the estate after the commencement of the case. E file irs   Gross income of the bankruptcy estate does not include amounts received or accrued by the debtor before the commencement of the case. E file irs 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. E file irs Income of the estate in individual chapter 11 cases. E file irs    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. E file irs 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. E file irs S. E file irs C. E file irs section 1115). E file irs Note. E file irs 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. E file irs Such payments should be reported by the debtor as miscellaneous income on his or her individual income tax return (Form 1040). E file irs 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. E file irs See Administrative expenses, below. E file irs Conversion or dismissal of chapter 11 cases. E file irs   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. E file irs If the chapter 11 case is converted to a chapter 7 case, 11 U. E file irs S. E file irs C. E file irs 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. E file irs Any income on this property will be taxed to the estate even if the income is realized after the conversion to chapter 7. E file irs 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. E file irs 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. E file irs Note. E file irs 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). E file irs Administrative expenses. E file irs   Allowable expenses include administrative expenses. E file irs    Administrative expenses can only be deducted by the estate, never by the debtor. E file irs   The bankruptcy estate is allowed deductions for bankruptcy administrative expenses and fees, including accounting fees, attorney fees, and court costs. E file irs 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. E file irs See IRC section 67(e). E file irs 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. E file irs Note. E file irs The bankruptcy estate uses Form 1041 as a transmittal for the tax return prepared using Form 1040 and its schedules. E file irs See Transmittal for Form 1040 under Tax Return Filing Requirements and Payment of Tax, later. E file irs Administrative expense loss. E file irs   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. E file irs The amounts can only be carried to a tax year of the estate and never to a debtor's tax year. E file irs 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. E file irs For a discussion of NOLs, see Publication 536. E file irs Attribute carryovers. E file irs   The bankruptcy estate may use its tax attributes the same way that the debtor would have used them. E file irs These items are determined as of the first day of the debtor's tax year in which the bankruptcy case begins. E file irs 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. E file irs   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. E file irs See Debt Cancellation, later. E file irs   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. E file irs The debtor also generally assumes any of the tax attributes, listed above, that arose during the administration of the bankruptcy estate. E file irs Note. E file irs The debtor does not assume the bankruptcy estate's administrative expense losses because they cannot be used by an individual taxpayer filing Form 1040. E file irs See Administrative expense loss, above. E file irs Passive and at-risk activities. E file irs   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. E file irs 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. E file irs These transfers include the return of exempt property and abandonment of estate property to the debtor. E file irs Carrybacks from the debtor's activities. E file irs   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. E file irs Carrybacks from the bankruptcy estate. E file irs   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. E file irs The estate may also carry back excess credits, such as the general business credit, to the pre-bankruptcy tax years. E file irs Tax Reporting – Chapter 11 Cases Allocation of income and credits on information returns and required statement for returns for individual chapter 11 cases. E file irs    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. E file irs 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. E file irs 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. E file irs The debtor and trustee may use a simple percentage method to allocate income and income tax withheld. E file irs The same method must be used to allocate the income and the withheld tax. E file irs Example. E file irs 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. E file irs 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. E file irs See IRC section 31(a). E file irs   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. E file irs 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. E file irs    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. E file irs 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. E file irs Note. E file irs The debtor-in-possession or trustee must attach a similar statement to the bankruptcy estate's income tax return (Form 1041). E file irs   The model Notice 2006-83 Statement, shown above, may be used by debtors, debtors-in-possession, and trustees to satisfy the reporting requirement. E file irs Self-employment taxes in individual chapter 11 cases. E file irs   IRC section 1401 imposes a tax upon the self-employment income, that is, the net earnings from self-employment of an individual. E file irs 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. E file irs   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. E file irs 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. E file irs This schedule includes self-employment income earned post-petition and the attributable deductions. E file irs The debtor must pay any self-employment tax imposed by IRC section 1401. E file irs Employment taxes and employer's obligation to file Form W-2 in individual chapter 11 cases. E file irs   In chapter 11 cases, post-petition wages earned by a debtor are generally treated as gross income of the estate. E file irs However, section 1115 of the Bankruptcy Code (11 U. E file irs S. E file irs C. E file irs 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. E file irs See Notice 2006-83. E file irs   The reporting and withholding obligations of a debtor's employer also do not change. E file irs 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. E file irs Notice to persons required to file information returns (other than Form W-2, Wage and Tax Statement) in individual chapter 11 cases. E file irs   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. E file irs See IRC section 6109(a)(2). E file irs 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). E file irs   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. E file irs See Notice 2006-83. E file irs 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. E file irs   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. E file irs 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. E file irs See Employment Tax Regulations section 31. E file irs 3402(f)(2)-1. E file irs 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. E file irs See IRC section 6654(a). E file irs Notice required in converted and dismissed cases. E file irs   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. E file irs The debtor should, within a reasonable time, send notice of such event to the persons (or entities) previously notified of the bankruptcy case. E file irs 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. E file irs   When a chapter 11 case is converted to a chapter 7 case, the bankruptcy estate will continue to exist as a separate taxable entity. E file irs 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. E file irs However, income from services performed by the debtor after conversion of the case to chapter 7 is not property of the chapter 7 estate. E file irs 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. E file irs Employment taxes. E file irs   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. E file irs See Publication 15, Circular E, Employer's Tax Guide, for details on employer tax responsibilities. E file irs   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. E file irs For a further discussion of employment taxes, see Employment Taxes, later. E file irs 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 . E file irs The bankruptcy court case number is . E file irs 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]:. E file irs   Year Taxpayer   Estate 1. E file irs Form W-2, Payor: $   $     Withheld income tax shown on Form W-2 $   $   2. E file irs Form 1099-INT Payor: $   $     Withheld income tax (if any) shown on Form 1099-INT $   $   3. E file irs Form 1099-DIV Payor: $   $     Withheld income tax (if any) shown on Form 1099-DIV $   $   4. E file irs 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. E file irs   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. E file irs This amount is equal to the sum of the personal exemption amount plus the basic standard deduction for a married individual filing separately. E file irs   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). E file irs   These amounts are generally adjusted annually. E file irs See the present year Form 1041 Instructions at www. E file irs irs. E file irs gov/form1041 for the current dollar amounts. E file irs Accounting period. E file irs   A bankruptcy estate may have a fiscal year. E file irs However, this period cannot be longer than 12 months. E file irs Change of accounting period. E file irs   The bankruptcy estate may change its accounting period (tax year) once without IRS approval. E file irs This rule allows the bankruptcy trustee to close the estate's tax year early, before the expected termination of the bankruptcy estate. E file irs The trustee can then file a return for the first short tax year to get a quick determination of the estate's tax liability. E file irs Employer identification number. E file irs   The trustee or debtor-in-possession must obtain an EIN for a bankruptcy estate. E file irs 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. E file irs    The social security number of the individual debtor cannot be used as the EIN for the bankruptcy estate. E file irs   Obtain an EIN for a bankruptcy estate by applying: Online by clicking on the EIN link at www. E file irs irs. E file irs gov/businesses/small. E file irs The EIN is issued immediately once the application information is validated. E file irs By telephone at 1-800-829-4933 from 7:00 a. E file irs m. E file irs to 7:00 p. E file irs m. E file irs in the trustee's or debtor-in-possession's local time zone. E file irs 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. E file irs   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. E file irs For more details, see Pub. E file irs 583, Starting a Business and Keeping Records. E file irs   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. E file irs Figuring tax due. E file irs   The bankruptcy estate figures its taxable income the same way an individual figures taxable income. E file irs However, the estate uses the tax rates for a married individual filing separately to calculate the tax on its taxable income. E file irs 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. E file irs The estate cannot take the higher standard deduction allowed for married persons filing separately who are 65 or older or blind. E file irs Tax rate schedule. E file irs 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. E file irs When to file. E file irs   Calendar year bankruptcy estates must file Form 1041 by April 15th. E file irs Fiscal year bankruptcy estates must file on or before the 15th day of the 4th month following the close of its tax year. E file irs 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. E file irs If the due date falls on a Saturday, Sunday, or legal holiday, file on the next business day. E file irs Note. E file irs 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. E file irs Transmittal for Form 1040. E file irs   Form 1041 is used as a transmittal for Form 1040. E file irs 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. E file irs   Prepare the bankruptcy estate's return by completing Form 1040. E file irs In the top margin of Form 1040, write “Attachment to Form 1041 —DO NOT DETACH. E file irs ” Then, attach Form 1040 to the Form 1041 transmittal. E file irs Enter the tax and payment amounts on lines 23 through 29 of Form 1041, then sign and date the return. E file irs An example of a bankruptcy estate's tax return is prepared below. E file irs Note. E file irs 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. E file irs Payment of Tax Due Payment methods. E file irs   Payment of tax due may be made by check or money order or by credit or debit card. E file irs For information on how to make payments electronically by credit or debit card, go to irs. E file irs gov/e-pay. E file irs      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. E file irs To enroll in EFTPS, go to eftps. E file irs gov or call 1-800-555-4477. E file irs For more information see Publication 966, Electronic Federal Tax Payment System: A Guide to Getting Started. E file irs Payment voucher – Form 1041-V. E file irs   Form 1041-V accompanies payments made by check or money order for Form 1041. E file irs The voucher includes information about the bankruptcy estate, including the name of the bankruptcy estate, trustee, EIN, and amount due. E file irs Using Form 1041-V assists the IRS in processing the payment more accurately and efficiently. E file irs We recommend the use of Form 1041-V; however, there is no penalty if the voucher is not used. E file irs Estimated tax – Form 1041-ES. E file irs   In most cases, the trustee or debtor-in-possession must pay any required estimated tax due for the bankruptcy estate. E file irs 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. E file irs 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. E file irs 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. E file irs If the employment taxes are not paid as required, the trustee may be held personally liable for payment of the taxes. E file irs   See Publication 15, (Circular E), Employer's Tax Guide, for details on employer tax responsibilities. E file irs 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. E file irs 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. E file irs 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. E file irs , with their individual income tax returns. E file irs Tax Return Example – Form 1041 This publication is not revised annually. E file irs Future changes to the forms and their instructions may not be reflected in this example. E file irs Note. E file irs The following return was prepared for tax year 2011. E file irs 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). E file irs Facts and circumstances. E file irs   On December 15, 2010, Thomas Smith filed a bankruptcy petition under chapter 7. E file irs Joan Black was appointed trustee to administer the bankruptcy estate and to distribute the assets. E file irs   The estate received the following assets from Mr. E file irs 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. E file irs   Also, the estate received a $251,500 capital loss carryover. E file irs   Mr. E file irs Smith's bankruptcy case was closed on December 31, 2011. E file irs During 2011, Mr. E file irs Smith was relieved of $70,000 of debt by the bankruptcy court. E file irs The estate chose a calendar year as its tax year. E file irs Joan, the trustee, reviews the estate's transactions and reports the taxable events on the estate's final return. E file irs Schedule B (Form 1040). E file irs    The certificate of deposit earned $5,500 of interest during 2011. E file irs Joan reports this interest on Schedule B. E file irs She completes this schedule and enters the result on Form 1040. E file irs Form 4562. E file irs   Joan enters the depreciation allowed on Form 4562. E file irs She completes the form and enters the result on Schedule E. E file irs Schedule E (Form 1040). E file irs   The commercial real estate was rented through the date of sale. E file irs Joan reports the income and expenses on Schedule E. E file irs She enters the net income on Form 1040. E file irs Form 4797. E file irs   The commercial real estate was sold on July 1, 2011, for $280,000. E file irs The property was purchased in 2001 at a cost of $250,000. E file irs The total depreciation allowable as of the date of sale was $120,000. E file irs Additionally, $25,000 of selling expenses were incurred. E file irs Joan reports the gain or loss from the sale on Form 4797. E file irs She completes the form and enters the gain on Schedule D (Form 1040). E file irs   Mr. E file irs Smith's former residence was sold on September 30, 2011. E file irs The sale price was $200,000, the selling expenses were $20,000, and his adjusted basis was $130,000. E file irs This sale is excluded from gross income under IRC section 121. E file irs Note. E file irs 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). E file irs Bankruptcy estates succeed to this exclusion at the commencement of the case. E file irs See Regulation section 1. E file irs 1398-3. E file irs Schedule D (Form 1040). E file irs   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). E file irs She enters the results on Form 1040. E file irs Form 1040, page 1. E file irs   Joan completes page 1 of the Form 1040 and enters the adjusted gross income on the first line of Form 1040, page 2. E file irs Schedule A (Form 1040). E file irs   During 2011, the estate paid mortgage interest and real property tax on Mr. E file irs Smith's former residence. E file irs It also paid income tax to the state. E file irs Joan enters the mortgage interest, real estate tax, and income tax on Schedule A. E file irs Also, she reports the bankruptcy estate's administrative expenses as a miscellaneous deduction not subject to the 2% floor on miscellaneous itemized deductions. E file irs She completes the Schedule A and enters the result on page 2 of Form 1040. E file irs Form 1040, page 2. E file irs   Joan determines the estate's taxable income and figures its tax using the tax rate schedule for married filing separately. E file irs She then enters the estate's estimated tax payments and figures the amount the estate still owes. E file irs Form 982. E file irs   Joan completes the Schedule D Tax Worksheet to figure the capital loss carryover. E file irs Because $70,000 of debt was canceled, Joan must reduce the tax attributes of the estate by the amount of the canceled debt. E file irs See Debt Cancellation, later. E file irs After the bankruptcy case ends, Mr. E file irs Smith will assume the estate's tax attributes. E file irs Mr. E file irs 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). E file irs Note. E file irs If the bankruptcy estate had continued, the capital loss carryover would be available to the bankruptcy estate for the 2012 tax year. E file irs Form 1041. E file irs   Joan enters the total tax, estimated tax payments, and tax due from Form 1040 on Form 1041. E file irs 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. E file irs This image is too large to be displayed in the current screen. E file irs Please click the link to view the image. E file irs Sample Form 1040 - page 1 This image is too large to be displayed in the current screen. E file irs Please click the link to view the image. E file irs Sample Form 1040 - page 2 This image is too large to be displayed in the current screen. E file irs Please click the link to view the image. E file irs Sample Schedule A This image is too large to be displayed in the current screen. E file irs Please click the link to view the image. E file irs Sample Schedule B This image is too large to be displayed in the current screen. E file irs Please click the link to view the image. E file irs Sample Schedule D This image is too large to be displayed in the current screen. E file irs Please click the link to view the image. E file irs Sample Schedule E This image is too large to be displayed in the current screen. E file irs Please click the link to view the image. E file irs Sample Form 4797 - page 1 This image is too large to be displayed in the current screen. E file irs Please click the link to view the image. E file irs Sample Form 2119 This image is too large to be displayed in the current screen. E file irs Please click the link to view the image. E file irs Sample Form 4797 - page 2 This image is too large to be displayed in the current screen. E file irs Please click the link to view the image. E file irs Sample Form 4562 This image is too large to be displayed in the current screen. E file irs Please click the link to view the image. E file irs Sample Capital Loss Carryover Worksheet This image is too large to be displayed in the current screen. E file irs Please click the link to view the image. E file irs 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. E file irs Otherwise, you do not have any carryovers. E file irs 1. E file irs Enter the amount from your 2010 Form 1040, line 41, or Form 1040NR, line 38. E file irs If a loss, enclose the amount in parentheses 1. E file irs 19,880   2. E file irs Enter the loss from your 2010 Schedule D, line 21, as a positive amount 2. E file irs 1,500   3. E file irs Combine lines 1 and 2. E file irs If zero or less, enter -0- 3. E file irs 21,380   4. E file irs Enter the smaller of line 2 or line 3 4. E file irs 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. E file irs       5. E file irs Enter the loss from your 2010 Schedule D, line 7, as a positive amount 5. E file irs 0   6. E file irs Enter any gain from your 2010 Schedule D, line 15. E file irs If a loss, enter -0- 6. E file irs         7. E file irs Add lines 4 and 6 7. E file irs 1,500   8. E file irs Short-term capital loss carryover for 2011. E file irs Subtract line 7 from line 5. E file irs If zero or less, enter -0-. E file irs If more than zero, also enter this amount on Schedule D, line 6 8. E file irs 0     If line 15 of your 2010 Schedule D is a loss, go to line 9; otherwise, skip lines 9 through 13. E file irs       9. E file irs Enter the loss from your 2010 Schedule D, line 15, as a positive amount 9. E file irs 251,500   10. E file irs Enter any gain from your 2010 Schedule D, line 7. E file irs If a loss, enter -0- 10. E file irs 0       11. E file irs Subtract line 5 from line 4. E file irs If zero or less, enter -0- 11. E file irs 1,500       12. E file irs Add lines 10 and 11 12. E file irs 1,500   13. E file irs Long-term capital loss carryover for 2011. E file irs Subtract line 12 from line 9. E file irs If zero or less, enter -0-. E file irs If more than zero, also enter this amount on Schedule D, line 14 13. E file irs 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. E file irs 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. E file irs 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. E file irs 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. E file irs Partnerships The filing requirements for a partnership in a bankruptcy proceeding do not change. E file irs However, the responsibility to file the required returns becomes that of the court appointed trustee, receiver, or debtor-in-possession. E file irs A partnership's debt that is canceled as a result of the bankruptcy proceeding is not included in the partnership's income. E file irs However, It may or may not be included in the individual partners' income. E file irs See Partnerships, below under Debt Cancellation. E file irs Corporations The filing requirements for a corporation in a bankruptcy proceeding also do not change. E file irs 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. E file irs The following discussion only highlights bankruptcy tax rules applying to corporations. E file irs The complex details of corporate bankruptcy reorganizations are beyond the scope of this publication. E file irs Therefore, you may wish to seek the help of a professional tax advisor. E file irs See Corporations under Debt Cancellation for information about a corporation's debt canceled in a bankruptcy proceeding. E file irs 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. E file irs 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. E file irs A “similar case” includes a receivership, foreclosure, or other similar proceeding in a federal or state court. E file irs 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. E file irs In a receivership, foreclosure, or similar proceeding before a federal or state agency involving certain financial institutions, the agency is treated as a court. E file irs 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. E file irs 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. E file irs 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. E file irs 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. E file irs 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. E file irs No loss is recognized in this situation. E file irs 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. E file irs To qualify, the corporation must have ceased business operations and have no assets nor income for the tax year. E file irs The exemption request must be submitted to the local IRS Insolvency Office handling the case. E file irs 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. E file irs 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. E file irs ” The statement must be signed by the trustee, receiver or assignee. E file irs 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). E file irs The IRS will act on your request within 90 days. E file irs Disclosure of return information to trustee. E file irs   Upon written request, current and earlier returns of the debtor are open to inspection by or disclosure to the trustee or receiver. E file irs 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. E file irs Material interest is generally defined as a financial or monetary interest. E file irs Material interest is not limited to the trustee's responsibility to file a return on behalf of the bankruptcy estate. E file irs Receiverships Court-established receiverships sometimes arise in connection with bankruptcies. E file irs Certain court-established receiverships should be treated as qualified settlement funds ("QSFs") for purposes of IRC section 468B and the underlying Treasury Regulations. E file irs QSFs are required to file an annual income tax return, Form 1120-SF, U. E file irs S. E file irs Income Tax Return for Settlement Funds. E file irs More information about QSFs may be found in Treasury Regulation sections 1. E file irs 468B-1 through -5. E file irs 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. E file irs After a return is filed, the IRS will either accept the return as filed or select the return for examination. E file irs Under examination the IRS may redetermine the tax liability shown on the return. E file irs 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. E file irs See Court Jurisdiction over Tax Matters, later. E file irs Prompt Determination Requests Pursuant to Rev. E file irs Proc. E file irs 2006-24, 2006-22 I. E file irs R. E file irs B. E file irs 943, www. E file irs irs. E file irs gov/irb/2006-22_IRB/ar12, as modified by Announcement 2011-77, www. E file irs irs. E file irs 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. E file irs 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). E file irs Making the request for determination. E file irs   As detailed in Rev. E file irs Proc. E file irs 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. E file irs O. E file irs Box 7346, Philadelphia, PA 19101–7346 (marked “Request for Prompt Determination”). E file irs   The request must be submitted in duplicate and must be executed under penalties of perjury. E file irs 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. E file irs 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. E file irs The name and location of the office where the return was filed. E file irs The name of the debtor. E file irs Debtor's social security number, TIN, or EIN. E file irs Type of bankruptcy estate. E file irs Bankruptcy case number. E file irs Court where the bankruptcy case is pending. E file irs   The copy of the return(s) submitted with the request must be an exact copy of a valid return. E file irs 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. E file irs    To qualify as valid, a return must meet certain criteria, including a signature under penalties of perjury. E file irs A document filed by the trustee with the jurat stricken, deleted, or modified will not qualify as a valid return. E file irs Examination of return. E file irs   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. E file irs If the return is selected for examination, it will be examined as soon as possible. E file irs 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. E file irs   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. E file irs   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. E file irs   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. E file irs Note. E file irs An incomplete request includes those submitted with a copy of a return form, the original of which does not qualify as a valid return. E file irs   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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Understanding your CP504B Notice

You have an unpaid amount due on your account. If you do not pay the amount due immediately, the
IRS will seize (levy) certain property or rights to property and apply it to pay the
amount you owe.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Read your notice carefully — it explains your due date, amount due, and payment options.
  • Make your payment by your due date. Go to the payments page to find out more about your payment options.

You may want to...


Answers to Common Questions

What is the notice telling me?
This notice is telling you that we intend to issue a levy against certain property or rights to property because you still have a balance due on one of your tax accounts. You must pay this amount immediately to avoid this. It is also telling you that we will begin searching for other assets on which to issue a levy. We may also file a Federal Tax Lien, if we have not already done so.

What do I have to do?
Pay the amount due shown on the notice. Mail us your payment in the envelope we sent you. Include the bottom part of the notice to make sure we correctly credit your account.

If you can't pay the whole amount now, call us at the number printed at the top of the notice to see if you qualify for an installment agreement.

How much time do I have?
You should pay your balance due by the due date shown on your notice.

What happens if I don't pay or contact the IRS?
If you don't pay the amount due, we may send you a notice giving you a right to a hearing before the IRS Office of Appeals if you have not already received such a notice. We may then seize ("levy") your property or rights to property. Property includes:

  • Wages, real estate commissions, and other income
  • Bank accounts
  • Business assets
  • Personal assets (including your car and home)
  • Social Security benefits

This is your notice of intent to levy as required by Internal Revenue Code section 6331(d).

If you don't pay the amount due or call us to make payment arrangements, we can file a Notice of Federal Tax Lien on your property at any time, if we haven’t already done so.

If the lien is in place, you may find it difficult to sell or borrow against your property. The tax lien would also appear on your credit report ― which may harm your credit rating ― and your creditors would also be publicly notified that the IRS has priority to seize your property.

Who should I contact?
If you have any questions about the notice, call us at the number printed at the top of the notice. A customer service representative will assist you.

What if I don't agree or have already taken corrective action?
If you do not agree with this notice, contact us immediately at the number printed at the top of the notice. We will do our best to help you. If you have already paid this liability or arranged to pay it with an installment agreement, you should still call us at the number printed at the top of the notice to make sure your account reflects this.

Page Last Reviewed or Updated: 05-Mar-2014

The E File Irs

E file irs Index A Additional Medicare Tax, Reminders, Reporting sick pay on Form W-2. E file irs Agents, reporting, Agents Agricultural workers, H-2A agricultural workers. E file irs Alternative methods of withholding, 9. E file irs Alternative Methods for Figuring Withholding Annuity payments, 8. E file irs Pensions and Annuities Assistance (see Tax help) Awards, employee achievement, Employee Achievement Awards B Back pay, Back Pay Below-market rate loans, Interest-Free and Below-Market-Interest-Rate Loans C Comments on publication, Comments and suggestions. E file irs Common paymaster, Common Paymaster Common-law employees, Common-Law Employees Common-law rules, Common-Law Rules Corporate officers, Common-Law Employees D Deferred compensation plans, nonqualified, Nonqualified Deferred Compensation Plans Direct sellers, Direct sellers. E file irs Director of corporation, Common-Law Employees E Electronic Form W-2, Reminders Employee achievement awards, Employee Achievement Awards Employee or contractor Attorney, Attorney Automobile industry, Automobile Industry Building industry, Building and Construction Industry Computer industry, Computer Industry Salesperson, Salesperson Taxicab driver, Taxicab Driver Trucking industry, Trucking Industry Employee's taxes paid by employer, Employee's Portion of Taxes Paid by Employer Employees Common-law rules, Common-Law Rules Industry examples, Industry Examples Statutory, Statutory Employees Employees defined, 1. E file irs Who Are Employees? Employees misclassification, Misclassification of Employees Excessive termination payments (golden parachute), Golden Parachute Payments Exempt organizations, 3. E file irs Employees of Exempt Organizations F Fellowship payments, Scholarship and Fellowship Payments Form W-2, electronic filing, Reminders G Golden parachute, Golden Parachute Payments I Idle time, Withholding for Idle Time Independent contractors, Independent Contractors Indian gaming profits, 10. E file irs Tables for Withholding on Distributions of Indian Gaming Profits to Tribal Members Interest-free loans, Interest-Free and Below-Market-Interest-Rate Loans International social security agreements, International Social Security Agreements L Leased employees, Leased employees. E file irs Leave sharing plans, Leave Sharing Plans Loans, interest-free or below-market rate, Interest-Free and Below-Market-Interest-Rate Loans M Ministers, Ministers. E file irs Misclassification of employees, Misclassification of Employees N Nonqualified plans, Nonqualified Deferred Compensation Plans O Officer of corporation, Common-Law Employees Outplacement services, Outplacement Services P Pension payments, 8. E file irs Pensions and Annuities Publications (see Tax help) R Real estate agents, Licensed real estate agents. E file irs Religious exemptions, 4. E file irs Religious Exemptions and Special Rules for Ministers Reporting agents, Agents S Scholarship payments, Scholarship and Fellowship Payments Sick pay, 6. E file irs Sick Pay Reporting SIMPLE retirement plans, SIMPLE Retirement Plans Simplified employee pension, Contributions to a Simplified Employee Pension (SEP) Statutory employees, Statutory Employees Statutory nonemployees, Statutory Nonemployees Suggestions for publication, Comments and suggestions. E file irs Supplemental unemployment benefits, Supplemental Unemployment Benefits T Tax help, How To Get Tax Help Tax-exempt organizations, 3. E file irs Employees of Exempt Organizations Tax-sheltered annuities, Tax-Sheltered Annuities Technical service specialists, Technical service specialists. E file irs Third-party sick pay, Sick Pay Paid by Third Party , Third-party sick pay recap Forms W-2 and W-3. E file irs TTY/TDD information, How To Get Tax Help W Withholding Alternative methods, 9. E file irs Alternative Methods for Figuring Withholding Idle time payments, Withholding for Idle Time Indian gaming profits, 10. E file irs Tables for Withholding on Distributions of Indian Gaming Profits to Tribal Members Pensions and annuities, Federal Income Tax Withholding Sick pay, Income Tax Withholding on Sick Pay Prev  Up     Home   More Online Publications