Protecting Your Rights And Your Future

Bankruptcy won’t necessarily lead to a tax audit

| Jun 27, 2017 | Personal Bankruptcy

Some people who are considering filing for bankruptcy are concerned that they will have to deal with an audit from the Internal Revenue Service. While this is certainly something to worry about if it occurs, it isn’t something that is a sure thing.

Whether you file for bankruptcy or not, you are facing the possibility of an audit each time you file your income tax return. There isn’t any law that specifically says that you will face an audit because of your bankruptcy. The law does say that you won’t be able to avoid an audit by filing for bankruptcy.

Another interesting point about bankruptcies and audits by the IRS is that there is a chance that your bankruptcy filing might provide you with a reduction or elimination of the amount you owe to the IRS. This is something that is also not guaranteed, so you should attempt to learn whether this may be possible in your case.

There are a few things that can possibly cause you an increased risk of being audited. If you work at a job where you are paid in cash, you might have a heightened risk of being audited. Business owners also face a higher risk of audits.

It is imperative that you take the steps necessary to get your debt under control. If this means considering bankruptcy, think carefully about the effects of filing. Make sure that you understand the different types of bankruptcy that are applicable to your circumstances.

An Arkansas bankruptcy attorney can help you determine which bankruptcy filing would be most appropriate for your situation.

Source: FindLaw, “Will Filing For Bankruptcy Cause an IRS Audit?,” accessed June 22, 2017