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Publication 908 - Introductory Material

Future Developments

For the latest information about developments related to Publication 908, such as legislation enacted after it was published, go to

What's New

Expiration of provision for catch-up contributions for IRC section 401(k) participants whose employer filed bankruptcy. The Pension Protection Act of 2006, P.L. 109-280, previously allowed additional contributions of up to $7,000 in a traditional or Roth IRA for employees who participated in an IRC section 401(k) plan of an employer that filed bankruptcy in an earlier year. This provision was not extended for tax years beginning on or after January 1, 2010.

Automatic 6-month extension of time to file a bankruptcy estate return now available for individuals in Chapter 7 or 11 bankruptcy. Beginning June 24, 2011, the IRS clarified in T.D. 9531 that there is available an automatic 6-month extension of time to file a bankruptcy estate income tax return for individuals in Chapter 7 or Chapter 11 bankruptcy proceedings upon filing a required application. The previous extension of time to file a bankruptcy estate return was 5 months.


The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. The changes to the U.S. Bankruptcy Code enacted by BAPCA are incorporated throughout this publication.Debtors filing under chapters 7, 11, 12, and 13 of the Bankruptcy Code must file all applicable federal, state, and local tax returns that become due after a case commences. Failure to file tax returns timely or obtain an extension can cause a bankruptcy case to be converted to another chapter or dismissed. In chapter 13 cases, the debtor must file all required tax returns for tax periods ending within 4 years of the filing of the bankruptcy petition.

Photographs of missing children. The IRS is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 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.


This publication is not intended to cover bankruptcy law in general, or to provide detailed discussions of the tax rules for the more complex corporate bankruptcy reorganizations or other highly technical transactions. Additionally, this publication is not updated on an annual basis and may not reflect recent developments in bankruptcy or tax law. If you need more guidance on the bankruptcy or tax laws applicable to your case, you should seek professional advice.

This publication explains the basic federal income tax aspects of bankruptcy.

A fundamental goal of the bankruptcy laws enacted by Congress is to give an honest debtor a financial “fresh start”. This is accomplished through the bankruptcy discharge, which is a permanent injunction (court ordered prohibition) against the collection of certain debts as a personal liability of the debtor.

Bankruptcy proceedings begin with the filing of either a voluntary petition in the United States Bankruptcy Court, or in certain cases an involuntary petition filed by creditors. This filing creates the bankruptcy estate.

  • The bankruptcy estate generally consists of all of the assets the individual or entity owns on the date the bankruptcy petition was filed.

  • The bankruptcy estate is treated as a separate taxable entity for individuals filing bankruptcy petitions under chapter 7 or 11 of the Bankruptcy Code, discussed later.

  • The tax obligations of taxable bankruptcy estates are discussed later under Individuals in Chapter 7 or 11.

Generally, when a debt owed to another person or entity is canceled, the amount canceled or forgiven is considered income that is taxed to the person owing the debt. If a debt is canceled under a bankruptcy proceeding, the amount canceled is not income. However, the canceled debt reduces other tax benefits to which the debtor would otherwise be entitled. See Debt Cancellation, later.

Useful Items - You may want to see:


  • 225 Farmer's Tax Guide

  • 525 Taxable and Nontaxable Income

  • 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts

  • 538 Accounting Periods and Methods

  • 544 Sales and Other Dispositions of Assets

  • 551 Basis of Assets

  • 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments

Form (and Instructions)

  • SS-4 Application for Employer Identification Number, and separate instructions

  • 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)

  • 1040 U.S. Individual Income Tax Return, and separate instructions

  • Schedule SE (Form 1040) Self-Employment Tax

  • 1040X Amended U.S. Individual Income Tax Return, and separate instructions

  • 1041 U.S. Income Tax Return for Estates and Trusts, and separate instructions

  • 1041-ES Estimated Income Tax for Estates and Trusts

  • 1041-V Payment Voucher

  • 4506 Request for Copy of Tax Return

  • 4506-T Request for Transcript of Tax Return

  • 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.

  • 4868 Application for Automatic Extension of Time To File U.S. Individual Income Tax Return

  • 7004 Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns

See How To Get Tax Help, later, for information about getting these publications and forms.

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