One of the most common questions I hear from new bankruptcy clients is:

“How do I get my tax transcripts from the IRS?”

The good news is that the IRS has made it much easier than it used to be. In just a few minutes, most people can download their tax transcripts online without having to wait for anything to arrive in the mail.

Before you do that, however, it is important to understand the difference between the various types of IRS transcripts and why your bankruptcy trustee may still ask for your complete tax return.

Tax Return Transcript vs. Tax Account Transcript

The IRS offers several different types of transcripts. The two most common are:

Tax Return Transcript

A Tax Return Transcript is a summary of the federal tax return that you filed. It includes information such as:

• Filing status
• Adjusted Gross Income (AGI)
• Taxable income
• Wages reported
• Many deductions and credits
• Refund or balance due

For many bankruptcy cases, this transcript provides enough information for the trustee to verify the income reported on your bankruptcy schedules.

Tax Account Transcript

A Tax Account Transcript is different.

Rather than summarizing the return itself, it shows activity that occurred after the return was filed, such as:

• Payments received
• Refunds issued
• Penalties
• Interest
• IRS adjustments
• Amended return activity

A Tax Account Transcript is not a substitute for your actual tax return.

When the Trustee Wants Your Actual Tax Return

Although tax transcripts are helpful, most Chapter 7 trustees prefer that you provide a complete copy of your signed federal income tax return. In some cases, they may also request your complete Michigan income tax return.

Why?

Because the actual return contains schedules and attachments that often do not appear on the transcript.

For example, if your Tax Return Transcript shows:

• Business income or losses
• Self-employment income
• Rental property
• Capital gains or losses
• Farm income
• Significant deductions

the trustee will usually want to review the complete federal return, including all schedules.

A transcript might simply show that you claimed a business loss. It generally does not show all of the underlying details explaining where that loss came from. The trustee needs those schedules to determine whether the loss is legitimate and whether there are any assets, business interests, or other financial information that should be reviewed.

Why Does the Trustee Need My Tax Returns?

Some clients wonder why they have to provide tax returns at all.

The answer is actually very straightforward.

When you file a bankruptcy case, you are asking the United States Bankruptcy Court to use the power of the federal government to stop your creditors from collecting their debts.

Immediately upon filing, the Automatic Stay goes into effect. Creditors generally must stop:

• Collection calls
• Lawsuits
• Wage garnishments
• Bank levies
• Collection letters
• Many foreclosures and repossessions

At the end of a successful Chapter 7 case, your qualifying debts may be permanently discharged.

That is an extraordinary benefit provided by federal law.

In exchange, the Bankruptcy Code requires you to fully disclose your financial affairs. One of the trustee’s responsibilities is to verify that the information contained in your bankruptcy petition is complete and accurate. Your income tax returns are one of the most important documents they use to perform that review.

Providing your tax returns is a relatively small request in exchange for receiving the protection of the Bankruptcy Court and, ultimately, a fresh financial start.

How to Download Your IRS Tax Transcript

If you need your IRS transcript, follow these steps:

1. Go to https://www.irs.gov.
2. Select Get Your Tax Record.
3. Sign in or create an IRS Online Account.
4. Verify your identity if prompted.
5. Choose the tax year you need.
6. Download your Tax Return Transcript as a PDF.

Many of my clients are able to complete this process in just a few minutes.

If You Don’t Have Your Actual Tax Return

If you used a tax preparer, they can usually provide another copy of the complete return that was filed.

If you prepared the return yourself using tax software, you may be able to log back into your account and download another copy.

If neither option is available, let my office know. Depending on the trustee assigned to your case and the facts of your situation, a Tax Return Transcript may be acceptable, although many trustees will still request the complete federal return, especially when business income or losses are involved.

We’re Here to Help

At the Law Offices of Walter Metzen, we guide our clients through every step of the bankruptcy process, including gathering the documents required by the Chapter 7 trustee.

If you’re thinking about filing bankruptcy, I offer a free consultation to review your financial situation, explain your options, and make sure you understand exactly what documents you’ll need before your case is filed.

With over 25,000 consumer bankruptcy cases filed throughout Metropolitan Detroit, my goal is to make the bankruptcy process as straightforward and stress-free as possible.