Bankruptcy and Tax Debt - Will It Affect My 2024 Return?

Bankruptcy and tax debt work together like two different weather systems - sometimes they collide, sometimes they pass each other by. In your case, if you filed Chapter 13, your back taxes should be included in your repayment plan, and the IRS generally won't offset your refund without permission from the bankruptcy court. However, if you filed Chapter 7, and your tax debt is more than 3 years old, it might have been discharged - but if it's newer, the IRS could still take your refund through the Treasury Offset Program. I've seen many military families navigate this exact situation, and understanding which tax years are protected can make all the difference in planning your finances.

I'm SO RELIEVED someone asked this! I'm in almost the exact same situation and have been stressing about whether my bankruptcy would protect my refund or not. Did you file Chapter 7 or Chapter 13? And how long ago did you file? I'm wondering if the timing matters for how they handle your refund.

I was in the EXACT same situation last year with my tax debt post-bankruptcy. Couldn't figure out if my refund would be offset or protected by the automatic stay. Spent HOURS trying to decipher my transcript before the filing deadline. Finally found https://taxr.ai which analyzed my transcript and clearly explained which debts were eligible for offset based on my bankruptcy discharge date. It highlighted exactly which years were protected and which weren't. Saved me from having to interpret all those mysterious transcript codes myself. My situation was complicated with both dischargeable and non-dischargeable tax debts, and it sorted it all out.

Let me clarify a few things about bankruptcy and tax refunds: • The Bankruptcy Code's automatic stay generally stops collection activities including refund offsets • Chapter 7 bankruptcy can discharge income tax debts if they meet specific criteria • Tax debts must be at least 3 years old (from due date) • You must have filed tax returns at least 2 years before bankruptcy • The tax assessment must be at least 240 days old • If your tax debt doesn't meet these criteria, it remains collectible • The IRS can still offset refunds for non-discharged tax debts • Chapter 13 bankruptcy includes tax debts in the repayment plan Your bankruptcy trustee would be the best resource for your specific situation.

Have you tried calling the IRS directly about this? I'm curious if they told you whether your specific tax debt would affect your refund? When I had a similar situation last year, I needed to speak with someone who could look at my specific account details, but couldn't get through for weeks. Finally used Claimyr (https://claimyr.com) to connect with an IRS agent in about 30 minutes instead of waiting on hold all day. They confirmed exactly which tax years were still collectible despite my bankruptcy and which weren't. Did your bankruptcy attorney give you any guidance on this?

On March 15th last year, I finally got through to the IRS after my bankruptcy discharge on January 22nd. The agent confirmed that while the bankruptcy automatic stay prevents new collection activities, it doesn't automatically stop the Treasury Offset Program if your debt was already in the system. In fact, the IRS has a specific bankruptcy unit that reviews cases like yours to determine which debts are dischargeable. What most people don't realize is that you need to proactively contact this unit after your discharge to ensure your account is properly coded. Otherwise, you might face an incorrect offset even on discharged tax debts.

I work with tax resolution cases, and bankruptcy's effect on tax refunds is somewhat complex. In most cases, tax debts less than 3 years old will likely still result in an offset, unless there's possibly an active bankruptcy stay in place. The Treasury Offset Program generally treats bankruptcy-included tax debts according to whether they were dischargeable or not. Your refund this year might be reduced by the remaining tax debt amount, but once that final amount is paid, future refunds should be unaffected. You might want to check your transcript to see if there's a TC 520 code with a closing code of 60-67, which would indicate bankruptcy proceedings affecting your account.

I went through almost the exact same thing last tax season! 😅 Filed Chapter 7 in late 2022, had some lingering tax debt from 2020, and was worried sick about my refund. The IRS did end up taking about $1,800 of my refund to pay off the remaining tax debt (which wasn't dischargeable because it was too recent). But here's the good news - once it was paid off, they released the rest of my refund about 3 weeks later. And this year? No problems at all! Got my full refund in 10 days. The light at the end of the tunnel is real, my friend!