Blog

Missing Tax Documents

If You Are Missing a W-2 Form

You can ask your employer to send new a copy of your W-2. Some employers charge a nominal fee for this service. Employers are required by law to keep copies of your W-2s and other payroll information for at least four years.

If You Are Missing a 1099 Form

Form 1099 reports interest, dividends, brokerage trades, and self-employment income.

Banks may have tax documents available for downloading from their web site, or you can call their customer service number to get a new 1099 mailed to you.

Your broker will be able to mail you a copy of your 1099 to report stock trading and other investment activity. Or you might be able to download a copy from the brokerage web site.

If you earned more than $600 as a consultant or independent contractor, your client is required to send you a 1099-MISC to report your income. Even if you didn’t receive a 1099, you are still required to report the income to the IRS.

How to Obtain Copies of Your Tax Documents from the IRS

The IRS receives copies of all your tax documents. You can easily obtain copies of them by mail or fax. You’ll need to fill out Form 4506-T to request your income documents. This form is used to request transcripts of various tax documents. To request the income documents, check the box for line 8, “Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript.”

The information will be mailed to you, and it will be a computer printout of the information contained on your various income documents. One word of caution: the IRS only retains the federal information on these forms. State and local information, such as state withholding amounts, will not show up on this transcript. After obtaining the transcript, you may want to contact the institutions shown on the transcript to obtain a copy of the original documents.

Your tax accountant is able to request these documents from the IRS for you as well, and the IRS can fax the documents to your accountant’s office. If you need these documents immediately, this will likely be the fastest way to obtain your income information.

If you need help with debt settlement then email us at clint@dunawaylg.com.

Discharging Tax Debts Chapter 13

Chapter 13 Bankruptcy and Taxes

For the most part, you cannot discharge tax debts in Chapter 13 bankruptcy. Instead, you repay your tax debts through the life of your Chapter 13 bankruptcy. How much of the tax debt you must repay depends on whether the tax debt is classified as a priority claim or a non-priority, unsecured claim. You must pay priority claims in full through your plan. You generally pay only a portion of your non-priority, unsecured tax debts.

Non-priority Tax Debts

In Chapter 13 bankruptcy, your non-priority tax debt is lumped with your other unsecured debt. This debt is paid through your Chapter 13 plan after all priority and secured claims are paid. Although you cannot fully discharge this debt, you will likely only pay a percentage of your total unsecured debt through the life of the plan.

Your tax debt will be non-priority, unsecured debt if it meets all of the following requirements:

1. The debt is for income taxes. For the most part, income taxes are the only type of tax debt that is non-priority debt in Chapter 13 bankruptcy. This means your tax debt must be for federal or state income taxes or taxes on gross receipts.

2. The return was due at least three years ago. The tax debt must be disclosed on a tax return that was due (including all valid extensions) at least three years before you filed for bankruptcy. For example, if you disclosed the taxes in a 2019 income tax return for which extensions to file the return expired on October 15, 2020, you will satisfy the tax return due date test if you file the bankruptcy petition after October 15, 2020.

3. The tax return was filed at least two years ago. You must have filed the tax return at least two years before filing for bankruptcy. To avoid additional objections from the taxing authority, you must make sure that you have properly signed and mailed the return, and that it is sufficiently complete to be deemed a tax return. In continuing with the example above, if extensions to file the 2005 return expired on October 15, 2020, you filed the tax return on April 15, 2008, and you filed your bankruptcy petition on October 15, 2020, the taxes won’t have non-priority status. This is because you have satisfied the tax return due date test, but not the tax return filing date text. In this scenario, you must wait until two years after April 15, 2020, or until April 15, 2020, to file for bankruptcy.

4. The taxes were assessed at least 240 days ago. The taxing authority must have assessed (entered the liability on the taxing authority’s records) the tax against you at least 240 days before you filed for bankruptcy. This time limit may be extended if you have an offer in compromise with the taxing authority or you had previously filed for bankruptcy.

5. You did not commit fraud or willful evasion of taxes. The tax return must not be fraudulent or frivolous and you cannot be guilty of any intentional act of evading the tax laws. If you file a joint petition, the taxing authority must prove that both you and your spouse committed an act of fraud related to the applicable return or willfully attempted to evade the tax.

Priority Tax Debts

One advantage of Chapter 13 bankruptcy over Chapter 7 is that you don’t have to pay priority tax debts immediately. In Chapter 7 you cannot discharge priority tax debt nor can you pay it back over time through the bankruptcy. Chapter 13 allows you to pay your priority tax debt through the life of the plan. This means that you do not have to liquidate or sell any assets to pay it back right away.

Since the bankruptcy court’s decision supersedes that of the taxing authority, the IRS cannot object to your payment plan once it is approved by the bankruptcy court. In addition, you can often pay priority tax debts at 0% interest over the life of the Chapter 13 repayment plan. This is a much better deal than the IRS will offer.

The following are types of priority tax debt which, absent a showing of severe hardship, you must pay back in full through the life of the Chapter 13 plan:

1. Tax liens. Even if the tax debt is classified as non-priority, if a lien based on the debt is attached to your property, the debt is classified as a secured debt. You must pay back 100% of any secured tax debt through the life of your plan.

2. Recent property taxes. If you incur a property tax before you file for bankruptcy and the tax was payable within a year before your filing, the tax is a priority claim. If a property tax was payable more than one year before your filing, the tax is non-priority. Keep in mind, though, that many counties attach a lien to your property upon assessment of the property tax or one year afterwards. If this happens, the tax debt will be secured (and treated as secured tax debt, discussed above).

3. Taxes that you are required to collect or withhold. These are taxes that you must withhold from your employee’s pay, such as FICA, Medicare, and income taxes. It also includes sales taxes that your customers pay to you and that you in turn pay to the government.

4. Certain employment taxes, excise taxes, and custom duties, depending on specific time periods.

5. Non-punitive tax penalties that relate to non-dischargeable taxes and where the transaction or event that sparked the penalty occurred less than three years before filing the bankruptcy petition.

6. Erroneous tax refunds or credits relating to non-dischargeable taxes.

If you need help with resolving your tax debt then contact the Dunaway Law Group at 480-389-6529 or send us a message HERE.

Can Anyone File For Bankruptcy In Arizona?

In a manner of speaking, yes, anyone can file for bankruptcy but what chapter of bankruptcy you qualify for depends on your specific situation. In October 2005, a massive change took place in the U.S. bankruptcy code when Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) as a response to the belief that too many people were taking advantage of Chapter 7 bankruptcy. The result of this new law forces people who can afford to repay some of their debt to file for bankruptcy under Chapter 13 instead of Chapter 7.

Chapter 7 Bankruptcy:

In a sense, anyone—even businesses—can file for Chapter 7 bankruptcy protection. There are no minimum or maximum debt limits you have to be concerned with. However, before you can file a Chapter 7 bankruptcy you must be able to pass the infamous Means Test. The Means Test is used to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the bankruptcy code. If there is a presumed abuse, your case must either be converted to a Chapter 13 or it will be dismissed. Most people who cannot file a Chapter 7 bankruptcy because their income is too high end up filing for Chapter 13.

Chapter 13 Bankruptcy:

There are a few key limitations about who can file for Chapter 13 bankruptcy. For one, businesses are not able to file a Chapter 13 bankruptcy. Additionally, neither can people with too much debt. Currently the debt limits are $1,081,400 in secured debt plus $360,475 in unsecured debt (taxes whether dischargeable or non-dischargeable are included in the unsecured debt limit calculation). If you make too much money to pass the means test and have too much debt to file a Chapter 13 there are still some options available to you.

Chapter 11 Bankruptcy:

In rare cases a person must file a Chapter 11 bankruptcy because they cannot file either a Chapter 7 or Chapter 13 bankruptcy. If a person does not pass the means test because they make too much money and they have too much debt to file a Chapter 13 then they must file a Chapter 11.  Additionally, because a corporation cannot file a Chapter 13 bankruptcy if they are looking to reorganize their debt they must file a Chapter 11 bankruptcy.

If you would like to speak with an Arizona Bankruptcy Attorney then call the Dunaway Law Group at 480-389-6529 or message us HERE.

Credit Cards After Bankruptcy

Am I allowed to keep any credit cards after I file for bankruptcy in Arizona?

The short answer is, probably not. Generally once you file bankruptcy your credit cards will be closed by the card issuer.

Can I exclude a credit card with zero balance from my bankruptcy?

If a credit card has a balance then it must be listed in the bankruptcy. The credit card company will then be notified that you filed for bankruptcy and close down that account. However, if there is a zero balance on a specific credit card then you do not have to list it in the bankruptcy. Credit card companies periodically check your credit and if they find out that you’ve filed bankruptcy they will most likely close out the credit card.

As soon as a bankruptcy is filed the Automatic Stay of Protection is created. This Automatic Stay prevents creditors from ever attempting to collect from you again. The penalties for violating the Automatic Stay are very harsh and this is why your credit card company will close out your account—they don’t want to be accused of attempting to collect money from you after filing bankruptcy.

But don’t worry; for good and bad you will be able to get credit card after filing for bankruptcy. Most clients report that they are inundated with credit offers soon after filing. If you are struggling with credit card debt and need to speak with a bankruptcy attorney then call us at 480-389-6529 or email at clint@dunawaylg.com.

Bankruptcy and “Underwater” Cars

Bankruptcy can absolutely help if you owe more on your car than it is worth.

Chapter 7 Bankruptcy – 722 Redemption:

Filing for Chapter 7 bankruptcy can allow you to reduce the amount you owe on your vehicle. Through a “722 redemption” you can seek a court order that allows you to pay your car loan company a lump sum payment equal to the market value of your vehicle. Most people going through bankruptcy don’t have a lump sum amount to pay off their vehicle, however, there are several companies that do 722 redemptions and who will finance the lump sum payment. They will pay off your original loan and then you will make monthly payments to them.

car in bankruptcy

How does the § 722 Redemption work?

Under 11 U.S.C. § 722 of the Bankruptcy Code you may redeem tangible personal property from a lien through paying the secured creditor a lump sum in a Chapter 7 Bankruptcy. In order to be eligible for a 722 redemption the property must be:

          1) Tangible personal property intended primarily for personal, family or household use;

          2) The secured claim must be paid a lump sum; and

          3) The lump sum payment must be based on the current retail value.

If you wish to redeem your vehicle in a Chapter 7 bankruptcy then you need to apply for a § 722 redemption loan. We closely work with several banks that can assist you in applying for one of these special loans. Typically, the interest rate is higher than normal due to the risk involved for the lender. Once you have received a 722 redemption loan and are in a Chapter 7 bankruptcy, a motion will be filed to redeem the vehicle. If the motion is granted by the court then the secured creditor will be paid a lump sum amount based on the current retail value of the vehicle. The secured creditor will then release the lien held on the vehicle.

Chapter 13 Bankruptcy and Car Cramdown:

If the amount of your car loan is greater than the value of your car, you might be able to reduce the amount of your loan and the interest rate in a Chapter 13 bankruptcy through a cramdown. Cramdown is a funny word that basically means you can reduce the amount you owe to equal the current value of the car. Whatever is left becomes unsecured debt, and is treated like your other unsecured debts.

Cramdowns are available in Chapter 13 bankruptcy only — you cannot cram down a car loan in Chapter 7 bankruptcy.  In a Chapter 13 bankruptcy, you propose a repayment plan to pay back your creditors over a three to five year period. In your plan, your attorney has the ability to propose that your car lender receive only the current value of your car instead of the current balance owed.

The unpaid portion of your loan is then treated as an unsecured debt. Other types of unsecured debt include credit cards and medical bills. Since most Chapter 13 plans pay little or nothing to these creditors, this means that your car lender will likely receive nothing or pennies on the dollar on the remaining balance of your loan. Upon completion of your bankruptcy, any unpaid balance on the car loan will be completely discharged and you will own the vehicle free and clear.

When you cram down a car loan in Chapter 13 bankruptcy, the law also allows you to lower your interest rate on the loan! In Arizona the interest rate will be determined by the current prime rate plus a little extra. Almost always this new interest rate is lower than your original car loan rate.

Additionally, the bankruptcy code has placed an important restriction on when you are allowed to cram down your car loan. In order to cram down a car loan, you must have purchased your vehicle at least 910 days (about 2 ½ years) prior to filing your bankruptcy.

If you are underwater on one or more of your vehicles and would like to speak with an experienced Arizona Bankruptcy Attorney then contact the Dunaway Law Group at 480-389-6529 or message us HERE.