Know the Impact of Bankruptcy on Your Taxes

Know the Impact of Bankruptcy on Your Taxes

The term bankruptcy is considered as a legal status of an individual or company that happens to be unable to repay their incurred debts from their creditors. In most cases, bankruptcy is being imposed by the court orders. It is usually initiated by the debtor. However, sometimes the weight of the issue is given to the debtor from the creditors.

YOU ARE ONE OF 50,000,000 AMERICANS WHO MUST F...
YOU ARE ONE OF 50,000,000 AMERICANS WHO MUST FILL OUT AN INCOME TAX RETURN BY MARCH 15. FILE YOURS EARLY. – NARA – 516201 (Photo credit: Wikipedia)

The IRS pub 17 2013 signifies the legal implications on income taxes. This involves the possibility of declaring bankruptcy and its variable forms. Chapter 11 bankruptcy pertains to the debts of the person being reorganized. In this scenario, the debtors have ways to repay some or total amount of their debts. The Chapter 7 bankruptcy involves the liquidation of the debtor’s assets and liabilities. In this situation, the debtors have no means to repay most, if not, the total amount of their debt.

How can Bankruptcy Create an Impact to Debts

Basically, filling of bankruptcy is very complicated. This makes it important for you to consult a bankruptcy lawyer to ensure that all actions you make are done appropriately. In general, bankruptcy does not create impacts to your income tax return, even if there is a cancellation of debt, which is normally taxable on your tax returns.
The reason behind this is that any sources of debts discharged in bankruptcy are excluded from the incomes under the income tax regulations. The regulations pertaining to bankruptcy in relation with income tax returns are:

1. If you are being audited, filling of bankruptcy will not stop the auditing. However, it will stop the collection process while the bankruptcy is on pending status. Moreover, the time collection activities stop, such as during the time that you are deemed as not collectible or during the processing of the compromise state is extended. Always consider these concerns before declaring bankruptcy.

2. Not all of tax debts are entitled for discharge in bankruptcy. Items that are considered as priority debt are not dis-chargeable, as well. This includes student loans, child support, fines stemming from committing of felonies, and drunk driving cases. The priority debts should be fully repaid, which are classified under the Chapter 13 bankruptcy.

Forgiveness of debt is usually considered as taxable income. However, it becomes ineffective to insolvency and bankruptcy. Sometimes, it is good to present offer in compromise by settling your tax debt. It is still suggested to confer your debt issues with a tax professional and bankruptcy attorney in order to come up with a set of appropriate course of action. This can help you eliminate the possibilities of applying legal actions, which are not suitable for your specific case.

How To Choose An Arizona Tax Attorney

Tax
Tax (Photo credit: 401(K) 2013)

If you have a tax related dispute with the state tax bureau, you need an Arizona tax attorney to help you. They will advocate on your behalf and help you come up with a reasonable payment plan.

Get in touch with previous clients who have dealt with the advocate. Inquire from them if they were content with the legal service that they were rendered. A good advocate will have a great impact on your case in regard to the amount of money you are going to save or recover.

Evaluate the qualification of the attorney by getting in touch with the bar association. Ask the duration the advocate has worked in tax law. It is important to check all their qualifications to be sure that you are dealing with someone knowledgeable in their field.

Plan a consultation with the advocate. Meet the prospective advocate to discuss with them the details of your case. Choose an attorney who suits your budget and your requirements as well.

It is required to have a contract that stipulates all the fees that you will be required to pay. The agreement should state the number of hours that your case will require. Make sure you read all the terms of the agreement before signing it.

5 Tips to Save Money on Your Business Legal Fees

Occurrence of disputes during the course of business operations is accepted as normal and considered a part of business. Nevertheless, there could be times when you might require taking up legal services for the settlement of these disputes. Business legal fees could be very steep at times making it difficult for small business owners to use such services. However, there are ways by which you can save money on the business legal fees. Some of these tips are as follows:

Choice of attorney

It is very essential to choose the right attorney for your case. Lawyers specialize in different areas of law and therefore, you should choose a lawyer who is adept at handling business related cases. Taking recommendations from friends, peers and relatives is the best way to find the relevant lawyer. The choice of lawyer should be done after much contemplation and research as this could mean saving money on your legal fees. You should remember that the flashiest or the most advertised might not be the best lawyer for your case.

Comparison

To get the best deal for your legal requirements, the most appropriate way is to compare the services and rates of various lawyers. After following the recommendations of your friends and relatives, you can shortlist a few lawyers, visit them and get quotes for your case. After comparing the services offered and the rates charged, you can come with the best deal. You should certainly be aware of the technicalities in your case so that you may find the most suitable lawyer for the job.

Do your research

Several procedures and processes during the course of a legal settlement are such that they can be handled by an individual. Therefore, instead of assigning these tasks to the lawyer, it is better to do them your self. This would save you money as they would have otherwise been billed by the lawyer. It is also essential to provide the lawyer the required information and documents so that there is no unnecessary delay or extra work involved.

Communication

If you are being billed by the hour, then you must be very careful about the way you communicate with your lawyer. Instead of going in for long talks and beating around the bush, keep your conversations short and to the point. In addition, you should not call the lawyer several times a day but make a list of your queries and get the queries cleared in a single call. This would save you considerable money over a short amount of time.

Negotiation

You can certainly save money on the business legal fees by negotiating with your lawyer. Instead of accepting billing by the hour, you should go for a flat fee. You should insist on getting the fee agreement in writing, so that there are no issues later. You may ask your lawyer about the cost of additional tasks that might come during the course of settlement. Ensure complete transparency as far as fees are concerned.

These tips can certainly help you get the best lawyer suited for the legal settlement of your case and save you money on the legal fees as well.

Sara Muler from loansforpeoplewithverybadcredit.net provided us with this free finance content.

Inheritance tax planning

People who wish to minimize estate taxes and keep their personal and financial details private should consider inheritance tax planning using legal devices such as living trusts and Texas wills. One of the main differences between these stratagems is that wills, being subject to the probate process, are required to be filed and records relating to wills are available for public access, whereas living trusts are treated privately by the courts and their details are not available to the public.

Estate taxes have been eliminated in Texas, so that in that state property may be inherited without payment of any state tax and in the case of modest estates the process of obtaining probate is streamlined and inexpensive. Federal inheritance tax is levied on larger estates, however, and it is in these cases that people can benefit from inheritance planning to reduce the level of federal inheritance tax payable on their estates. The levels of federal inheritance taxes are quite punitive, as high as one third of the estate value, and are payable in cash. Often heirs are forced to liquidate the property they have inherited – real estate, businesses, jewelry or valuable collections – at a loss so that they can fulfill their federal tax obligations. To be sure that assets are passed on to the inheritors, and do not need to be sold on order to pay federal inheritance taxes, estate planning attorneys will help with making Texas wills and setting up living trusts.

If you have worked hard to accumulate assets during your lifetime, and wish your heirs to gain the most benefit from your estate after your death, consider consulting an estate planning attorney. A professional inheritance tax planner will be able to explain the best legal devices for your particular circumstances so that you can decide whether a Texas will or living trust is a way of ensuring that your belongings are dispersed in the manner that you wish.

Learning About Taxation Attorneys

No one really likes to hear taxation attorneys mentioned because they feel that these individuals work for the internal revenue service and that they will be working with attorneys that do not have their best interest at heart. However, this is not the truth and you may want to know more about this. This article will discuss some of things that these attorneys do.

These attorneys have worked with the IRS in the past. That is how they got their title and it is what makes them able to give you specific information that may be able to help you when it comes to your taxes and any issues that you may be dealing with. You should realize that these people will be able to help you by explaining what you may not fully understand.

There are times when some individuals have had issues related to payroll taxes. These are the types of people that really would benefit from working with these types of attorneys. It can be frightening to know that you are begin audited and it may be difficult to determine what you need to do in order to clear things up and to make things better. If you are working with an attorney that has worked with these types of attorneys in the past you will need to listen to what they have to say and how they can help you. That will be much better for you in long run.

If you have some concerns related to working with these types of attorneys then you will want to take the time to learn about the different areas that these attorneys specialize in. When you do this, you will have a better understanding of why you may need a taxation attorney. You may find out that you are much better with these attorneys than an everyday, average attorney.