Does a business bankruptcy cause a red flag on a later return filed with the IRS?

When a person or business files for bankruptcy, there’s no evidence that it causes the IRS to look at their tax returns more carefully or examine them for fraud. While the question is often asked by those filing for bankruptcy, and it is, of course, possible that a person who filed may happen to get audited that year, there is no legitimate connection between the two. There are also no rules in the IRS code that would sensibly trigger such a connection.

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What happens to my company if I file for bankruptcy?

A company going bankrupt is not just a source of anxiety for its leaders. Investors, creditors, and employees all share the same anxiety and stress. When a company can no longer pay its bills or even remain fully operational, it will file a Chapter 7 or Chapter 11 bankruptcy. What happens after filing for bankruptcy depends on which type the company has opted for.

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