Taxes Before Bankruptcy
I have a struggling business and am considering personal bankruptcy. If I were to close down my business and file for bankruptcy how long would it take before I can actually file for bankruptcy?
So I have to wait until the end of the year to file my final business taxes first or can that be filed as soon as the business is shut down?
My operating year ends on Dec 31 each year, but having already operated in the new year, I am left unsure of how this will work. Will I have to wait until next year before I can file?
I am really confused about this.
Posted from: Ontario
You can both shut down the business and file a bankruptcy without to much trouble and at any point during the year.
The reason largely relates to how your personal tax return will be done during a bankruptcy. Ultimately the date of your bankruptcy is deemed to be a year end for tax purposes. So the result is that in the year you file for bankruptcy there are two returns, one from the January 1 to the date of bankruptcy (pre-bankruptcy) and one from the date of bankruptcy to December 31 (post-bankruptcy). Then what happens is that any money owing from your pre-bankruptcy taxes is automatically cleared.
The net result is you can close the business at any point in the year, even have your final year end taxes prepared by your accountant at that point in the year and then file bankruptcy. The key thing is to close the business before you file a bankruptcy, the rest of it will really work itself out.
If you are still confused I would recommend contacting a local trustee directly, this really is a fairly straightforward process so they will be able to help you better understand what steps need to be taken.