How to Report Bankruptcy to the IRS

If You're Filing Chapter 13

1). Download forms from the U.S. Courts website and file them with the federal bankruptcy court for your district. The website includes an online court locator. You'll have to include the filing fee and a detailed list of your income, assets, expenses and debts as part of the paperwork. In Chapter 13, the court will set up a three- or five-year plan for you to pay off some of your debt, after which many of your remaining debts will be discharged -- wiped out.
2). File any tax returns from the previous four years that you haven't already submitted to the IRS. If you don't have all your returns in, the IRS can request the court dismiss your bankruptcy petition or convert the filing to Chapter 7, the IRS website states.
3). File your tax return for the current year. While the IRS treats many forms of debt forgiveness as income -- if a hospital writes off a $1,000 medical debt, for instance, the IRS may want you paying taxes on the money -- you don't pay anything on debts discharged by bankruptcy. If you're claiming capital losses on investments or net operating losses on your one-person business, however, you'll have to reduce the losses you claim to take the discharged debts into account.

1). Download forms from the U.S. Courts website and file them with the federal bankruptcy court for your district, along with the filing fee and a detailed list of your income, assets, expenses and debts. In Chapter 7, the court may decide to sell off your property to pay your creditors -- your state law will exempt some of what you own from being sold -- but once that's done, most of your remaining debts will be discharged. When you file for Chapter 7, your assets and debts at that time become a "bankruptcy estate," a separate legal entity in the eyes of the IRS.
2). File a "short year" tax return within four months of filing for bankruptcy. The IRS allows you to submit two tax returns in a year you file for Chapter 7, with the first return covering from January 1 to the date you gave the court your paperwork. If you owe any taxes on this return, the bankruptcy estate will pay them, unless all your property is covered by your state's exemption laws. If that's the case, just file one return, as usual.
3). File the second return for the year -- or one return if you don't go short-year -- ignoring all assets and debts bound up in the bankruptcy estate. The court-appointed bankruptcy trustee will file a separate tax return for the estate; you have to file for any income and assets outside that, including any assets exempt from sale in Chapter 7, the IRS states.