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Irs E File 2012

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Irs E File 2012

Irs e file 2012 Publication 560 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionSEP plans. Irs e file 2012 SIMPLE plans. Irs e file 2012 Qualified plans. Irs e file 2012 Ordering forms and publications. Irs e file 2012 Tax questions. Irs e file 2012 Future Developments For the latest information about developments related to Publication 560, such as legislation enacted after we release it, go to www. Irs e file 2012 irs. Irs e file 2012 gov/pub560. Irs e file 2012 What's New Compensation limit increased for 2013 and 2014. Irs e file 2012  For 2013 the maximum compensation used for figuring contributions and benefits increases to $255,000. Irs e file 2012 This limit increases to $260,000 for 2014. Irs e file 2012 Elective deferral limit for 2013 and 2014. Irs e file 2012  The limit on elective deferrals, other than catch-up contributions, increases to $17,500 for 2013 and remains at $17,500 for 2014. Irs e file 2012 These limits apply for participants in SARSEPs, 401(k) plans (excluding SIMPLE plans), section 403(b) plans and section 457(b) plans. Irs e file 2012 Defined contribution limit increased for 2013 and 2014. Irs e file 2012  The limit on contributions, other than catch-up contributions, for a participant in a defined contribution plan increases to $51,000 for 2013. Irs e file 2012 This limit increases to $52,000 for 2014. Irs e file 2012 SIMPLE plan salary reduction contribution limit for 2013 and 2014. Irs e file 2012  The limit on salary reduction contributions, other than catch-up contributions, increases to $12,000 for 2013 and remains at $12,000 for 2014. Irs e file 2012 Catch-up contribution limit remains unchanged for 2013 and 2014. Irs e file 2012  A plan can permit participants who are age 50 or over at the end of the calendar year to make catch-up contributions in addition to elective deferrals and SIMPLE plan salary reduction contributions. Irs e file 2012 The catch-up contribution limitation for defined contribution plans other than SIMPLE plans remains unchanged at $5,500 for 2013 and 2014. Irs e file 2012 The catch-up contribution limitation for SIMPLE plans remains unchanged at $2,500 for 2013 and 2014. Irs e file 2012 The catch-up contributions a participant can make for a year cannot exceed the lesser of the following amounts. Irs e file 2012 The catch-up contribution limit. Irs e file 2012 The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Irs e file 2012 See “Catch-up contributions” under Contribution Limits and Limit on Elective Deferrals in chapters 3 and 4, respectively, for more information. Irs e file 2012 All section references are to the Internal Revenue Code, unless otherwise stated. Irs e file 2012 Reminders In-plan Roth rollovers. Irs e file 2012  Section 402A(c)(4) provides for a distribution from an individual's account in a 401(k) plan, other than from a designated Roth account, that is rolled over to the individual's designated Roth account in the same plan. Irs e file 2012 An in-plan Roth rollover is not treated as a distribution for most purposes. Irs e file 2012 Section 402A(c)(4) was added by the Small Business Jobs Act of 2010 and applies to distributions made after September 27, 2010. Irs e file 2012 For additional guidance on in-plan Roth rollovers, see Notice 2010-84, 2010-51 I. Irs e file 2012 R. Irs e file 2012 B. Irs e file 2012 872, available at  www. Irs e file 2012 irs. Irs e file 2012 gov/irb/2010-51_IRB/ar11. Irs e file 2012 html. Irs e file 2012 In-plan Roth rollovers expanded. Irs e file 2012  Beginning in 2013, a plan with designated Roth accounts can permit a participant to roll over amounts into a designated Roth account from his or her other accounts in the same plan, regardless of whether the participant is eligible for a distribution from the other accounts. Irs e file 2012 Section 402A(c)(4) was amended by the American Taxpayer Relief Act of 2012. Irs e file 2012 For more information, see Notice 2013-74, 2013-52 I. Irs e file 2012 R. Irs e file 2012 B. Irs e file 2012 819, available at www. Irs e file 2012 irs. Irs e file 2012 gov/irb/2013-52_IRB/ar11. Irs e file 2012 html. Irs e file 2012 Credit for startup costs. Irs e file 2012  You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP, SIMPLE, or qualified plan. Irs e file 2012 The credit equals 50% of the cost to set up and administer the plan and educate employees about the plan, up to a maximum of $500 per year for each of the first 3 years of the plan. Irs e file 2012 You can choose to start claiming the credit in the tax year before the tax year in which the plan becomes effective. Irs e file 2012 You must have had 100 or fewer employees who received at least $5,000 in compensation from you for the preceding year. Irs e file 2012 At least one participant must be a non-highly compensated employee. Irs e file 2012 The employees generally cannot be substantially the same employees for whom contributions were made or benefits accrued under a plan of any of the following employers in the 3-tax-year period immediately before the first year to which the credit applies. Irs e file 2012 You. Irs e file 2012 A member of a controlled group that includes you. Irs e file 2012 A predecessor of (1) or (2). Irs e file 2012 The credit is part of the general business credit, which can be carried back or forward to other tax years if it cannot be used in the current year. Irs e file 2012 However, the part of the general business credit attributable to the small employer pension plan startup cost credit cannot be carried back to a tax year beginning before January 1, 2002. Irs e file 2012 You cannot deduct the part of the startup costs equal to the credit claimed for a tax year, but you can choose not to claim the allowable credit for a tax year. Irs e file 2012 To take the credit, use Form 8881, Credit for Small Employer Pension Plan Startup Costs. Irs e file 2012 Retirement savings contributions credit. Irs e file 2012  Retirement plan participants (including self-employed individuals) who make contributions to their plan may qualify for the retirement savings contribution credit. Irs e file 2012 The maximum contribution eligible for the credit is $2,000. Irs e file 2012 To take the credit, use Form 8880, Credit for Qualified Retirement Savings Contributions. Irs e file 2012 For more information on who is eligible for the credit, retirement plan contributions eligible for the credit and how to figure the credit, see Form 8880 and its instructions or go to the IRS website and search Retirement Topics-Retirement Savings Contributions Credit (Saver's Credit). Irs e file 2012 Photographs of missing children. Irs e file 2012  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Irs e file 2012 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Irs e file 2012 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Irs e file 2012 Introduction This publication discusses retirement plans you can set up and maintain for yourself and your employees. Irs e file 2012 In this publication, “you” refers to the employer. Irs e file 2012 See chapter 1 for the definition of the term employer and the definitions of other terms used in this publication. Irs e file 2012 This publication covers the following types of retirement plans. Irs e file 2012 SEP (simplified employee pension) plans. Irs e file 2012 SIMPLE (savings incentive match plan for employees) plans. Irs e file 2012 Qualified plans (also called H. Irs e file 2012 R. Irs e file 2012 10 plans or Keogh plans when covering self-employed individuals), including 401(k) plans. Irs e file 2012 SEP, SIMPLE, and qualified plans offer you and your employees a tax-favored way to save for retirement. Irs e file 2012 You can deduct contributions you make to the plan for your employees. Irs e file 2012 If you are a sole proprietor, you can deduct contributions you make to the plan for yourself. Irs e file 2012 You can also deduct trustees' fees if contributions to the plan do not cover them. Irs e file 2012 Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan. Irs e file 2012 Under a 401(k) plan, employees can have you contribute limited amounts of their before-tax (after-tax, in the case of a qualified Roth contribution program) pay to the plan. Irs e file 2012 These amounts (and the earnings on them) are generally tax free until your employees receive distributions from the plan or, in the case of a qualified distribution from a designated Roth account, completely tax free. Irs e file 2012 What this publication covers. Irs e file 2012   This publication contains the information you need to understand the following topics. Irs e file 2012 What type of plan to set up. Irs e file 2012 How to set up a plan. Irs e file 2012 How much you can contribute to a plan. Irs e file 2012 How much of your contribution is deductible. Irs e file 2012 How to treat certain distributions. Irs e file 2012 How to report information about the plan to the IRS and your employees. Irs e file 2012 Basic features of SEP, SIMPLE, and qualified plans. Irs e file 2012 The key rules for SEP, SIMPLE, and qualified plans are outlined in Table 1. Irs e file 2012 SEP plans. Irs e file 2012   SEPs provide a simplified method for you to make contributions to a retirement plan for yourself and your employees. Irs e file 2012 Instead of setting up a profit-sharing or money purchase plan with a trust, you can adopt a SEP agreement and make contributions directly to a traditional individual retirement account or a traditional individual retirement annuity (SEP-IRA) set up for yourself and each eligible employee. Irs e file 2012 SIMPLE plans. Irs e file 2012   Generally, if you had 100 or fewer employees who received at least $5,000 in compensation last year, you can set up a SIMPLE plan. Irs e file 2012 Under a SIMPLE plan, employees can choose to make salary reduction contributions rather than receiving these amounts as part of their regular pay. Irs e file 2012 In addition, you will contribute matching or nonelective contributions. Irs e file 2012 The two types of SIMPLE plans are the SIMPLE IRA plan and the SIMPLE 401(k) plan. Irs e file 2012 Qualified plans. Irs e file 2012   The qualified plan rules are more complex than the SEP plan and SIMPLE plan rules. Irs e file 2012 However, there are advantages to qualified plans, such as increased flexibility in designing plans and increased contribution and deduction limits in some cases. Irs e file 2012 Table 1. Irs e file 2012 Key Retirement Plan Rules for 2013 Type  of  Plan Last Date for Contribution Maximum Contribution Maximum Deduction When To Set Up Plan SEP Due date of employer's return (including extensions). Irs e file 2012 Smaller of $51,000 or 25%1 of participant's compensation. Irs e file 2012 2 25%1 of all participants' compensation. Irs e file 2012 2 Any time up to the due date of employer's return (including extensions). Irs e file 2012 SIMPLE IRA and SIMPLE 401(k) Salary reduction contributions: 30 days after the end of the month for which the contributions are to be made. Irs e file 2012 4  Matching or nonelective contributions: Due date of employer's return (including extensions). Irs e file 2012 Employee contribution: Salary reduction contribution up to $12,000, $14,500 if age 50 or over. Irs e file 2012   Employer contribution:  Either dollar-for-dollar matching contributions, up to 3% of employee's compensation,3 or fixed nonelective contributions of 2% of compensation. Irs e file 2012 2 Same as maximum contribution. Irs e file 2012 Any time between 1/1 and 10/1 of the calendar year. Irs e file 2012   For a new employer coming into existence after 10/1, as soon as administratively feasible. Irs e file 2012 Qualified Plan: Defined Contribution Plan  Elective deferral: Due date of employer's return (including extensions). Irs e file 2012 4   Employer contribution: Money Purchase or Profit-Sharing: Due date of employer's return (including extensions). Irs e file 2012  Employee contribution: Elective deferral up to $17,500, $23,000 if age 50 or over. Irs e file 2012   Employer contribution: Money Purchase: Smaller of $51,000 or 100%1 of participant's compensation. Irs e file 2012 2  Profit-Sharing: Smaller of $51,000 or 100%1 of participant's compensation. Irs e file 2012 2  25%1 of all participants' compensation2, plus amount of elective deferrals made. Irs e file 2012   By the end of the tax year. Irs e file 2012 Qualified Plan: Defined Benefit Plan Contributions generally must be paid in quarterly installments, due 15 days after the end of each quarter. Irs e file 2012 See Minimum Funding Requirement in chapter 4. Irs e file 2012 Amount needed to provide an annual benefit no larger than the smaller of $205,000 or 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. Irs e file 2012 Based on actuarial assumptions and computations. Irs e file 2012 By the end of the tax year. Irs e file 2012 1Net earnings from self-employment must take the contribution into account. Irs e file 2012 See Deduction Limit for Self-Employed Individuals in chapters 2 and 4 . Irs e file 2012  2Compensation is generally limited to $255,000 in 2013. Irs e file 2012  3Under a SIMPLE 401(k) plan, compensation is generally limited to $255,000 in 2013. Irs e file 2012  4Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions and elective deferrals. Irs e file 2012 What this publication does not cover. Irs e file 2012   Although the purpose of this publication is to provide general information about retirement plans you can set up for your employees, it does not contain all the rules and exceptions that apply to these plans. Irs e file 2012 You may also need professional help and guidance. Irs e file 2012   Also, this publication does not cover all the rules that may be of interest to employees. Irs e file 2012 For example, it does not cover the following topics. Irs e file 2012 The comprehensive IRA rules an employee needs to know. Irs e file 2012 These rules are covered in Publication 590, Individual Retirement Arrangements (IRAs). Irs e file 2012 The comprehensive rules that apply to distributions from retirement plans. Irs e file 2012 These rules are covered in Publication 575, Pension and Annuity Income. Irs e file 2012 The comprehensive rules that apply to section 403(b) plans. Irs e file 2012 These rules are covered in Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans). Irs e file 2012 Comments and suggestions. Irs e file 2012   We welcome your comments about this publication and your suggestions for future editions. Irs e file 2012   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Irs e file 2012 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Irs e file 2012 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Irs e file 2012   You can send your comments from www. Irs e file 2012 irs. Irs e file 2012 gov/formspubs. Irs e file 2012 Click on “More Information” and then on “Give us feedback. Irs e file 2012 ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Irs e file 2012 Ordering forms and publications. Irs e file 2012   Visit www. Irs e file 2012 irs. Irs e file 2012 gov/formspubs to download forms  and publications, call 1-800-TAX-FORM  (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Irs e file 2012 Internal Revenue Service 1201 N. Irs e file 2012 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Irs e file 2012   If you have a tax question, check the information available on IRS. Irs e file 2012 gov or call 1-800-829-1040. Irs e file 2012 We cannot answer tax questions sent to either of the above addresses. Irs e file 2012 Note. Irs e file 2012 Forms filed electronically with the Department of Labor are not available on the IRS website. Irs e file 2012 Instead, see www. 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Winter 2014 Statistics of Income Bulletin Now Available


IR-2014-33, March 20, 2014

WASHINGTON — The Internal Revenue Service today announced the availability of the winter 2014 issue of the Statistics of Income Bulletin, which features preliminary data for individual income tax returns filed for Tax Year 2012.

The Statistics of Income (SOI) Division produces the SOI Bulletin on a quarterly basis. Articles included in the publication provide the most recent data available from various tax and information returns filed by U.S. taxpayers. This issue includes articles on the following topics:

Individual Income Tax Returns, Preliminary Data, 2012: Taxpayers filed 145 million individual income tax returns for 2012. The adjusted gross income (AGI) reported on these returns totaled $9 trillion, a 9 percent increase from the previous year. Taxable income rose almost 12 percent to more than $6 trillion, accordingly, total income tax increased 15 percent to $1.2 trillion. Although taxpayers reported $29 billion in alternative minimum tax, an increase of almost 8 percent compared to the prior year, the number of returns reporting the AMT fell one percent.

Sales of Capital Assets Panel Data Reported on Individual Tax Returns, 2004-2007:  The SOI panel study of individual taxpayer trends in taxes and income showed the following increases from 2004 through 2007.

  • Net gains and losses increased 84.7 percent, from $496.3 billion to $916.5 billion.
  • Capital gains rose 69.2 percent to $1.1 trillion during this same period.

For all 4 years of the study, taxpayers realized most combined short- and long-term net gains less losses from passthrough entities (partnerships, S corporations, and fiduciaries).

Split-Interest Trusts, Filing Year 2012:  Tax preparers filed 113,688 Forms 5227 to report the financial activities of split-interest trusts to the IRS for Filing Year 2012, a 3.4-percent decline from 2011. Split-interest trusts reported 16,500 distributions of principal ($2.5 billion)  and 15,580 distributions of income ($1,793.7 billion) for the year. Asset contributions rose to more than $5.2 billion, a 74 percent increase over the previous year. Charitable remainder trusts continued to be the most common split-interest trust, accounting for 93 percent of the returns filed.

Nonprofit Charitable Organizations, 2010: Tax exempt public charities (501(c)(3) organizations) filed almost 270,000 Forms 990 and 990-EZ and reported $2.9 trillion in assets for Tax Year 2010, an increase of 9 percent from the previous year. These organizations reported $1.6 trillion in total revenue, nearly three-quarters ($1.2 trillion) of which came from program services. They reported $1.5 trillion in expenses.

The Statistics of Income Bulletin is available for download at IRS.gov/taxstats. Printed copies of the Statistics of Income Bulletin are available from the Superintendent of Documents, U.S. Government Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954. The annual subscription rate is $67 ($93.80 foreign), single issues cost $44 ($61.60 foreign).

For more information about these data, write to the Internal Revenue Service (RAS:S), Director, Statistics of Income, 1111 Constitution Ave., NW (K-Room 4112), Washington, DC 20224-0002.

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Page Last Reviewed or Updated: 20-Mar-2014

The Irs E File 2012

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