{"id":286976,"date":"2016-04-04T10:41:54","date_gmt":"2016-04-04T15:41:54","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/bankruptcy\/what-is-bankruptcy\/will-filing-for-bankruptcy-cause-an-irs-audit.html"},"modified":"2025-05-30T11:02:00","modified_gmt":"2025-05-30T16:02:00","slug":"will-filing-for-bankruptcy-cause-an-irs-audit","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/bankruptcy\/what-is-bankruptcy\/will-filing-for-bankruptcy-cause-an-irs-audit.html","title":{"rendered":"Will Filing For Bankruptcy Cause an IRS Audit?"},"content":{"rendered":"\n
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Will Filing For Bankruptcy Cause an IRS Audit?<\/h1>\n\n
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\n By Christie Nicholson, J.D.<\/a> | Legally reviewed by Laura Temme, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n\n

There may come a time when paying your outstanding\u00a0bills is no longer a possibility.\u00a0If you are filing for\u00a0Chapter 7 bankruptcy or a Chapter 13 bankruptcy<\/a>\u00a0case and have outstanding tax issues, you might be\u00a0worried\u00a0that bankruptcy could trigger an\u00a0Internal Revenue Service (IRS)<\/a>\u00a0audit.<\/p>\n

This article addresses\u00a0whether filing for bankruptcy sends a red flag to the IRS and why the IRS would audit someone during bankruptcy. It also\u00a0examines\u00a0how your bankruptcy can affect the results of a tax audit.<\/p>\n

Official IRS Policy on Bankruptcy Filing<\/h2>\n

No official policy states that the IRS targets people filing for bankruptcy. This doesn’t mean the Internal Revenue Service doesn’t single out people who file a Chapter 7 bankruptcy case. Instead, it notes that there’s no formal IRS policy requiring\u00a0that IRS workers target taxpayers who file bankruptcy petitions. In other words, a bankruptcy filing isn’t guaranteed to trigger an IRS audit.<\/p>\n

According to the U.S. Bankruptcy Courts, the number of\u00a0bankruptcy petitions in 2023<\/a>\u00a0increased by\u00a013% compared to\u00a02022. By the end of September 2023, 383,810 people had filed for bankruptcy in this country.<\/p>\n

Given this number, it would be nearly impossible\u00a0and extremely\u00a0impractical\u00a0for the IRS to audit everyone who filed a bankruptcy petition. Declaring\u00a0bankruptcy doesn’t mean\u00a0a person is cheating\u00a0on their income tax returns. Furthermore, the IRS doesn’t have the financial resources or the staff to automatically audit everyone who files for bankruptcy.<\/p>\n

The IRS May Scrutinize Your Finances if You File Bankruptcy<\/h2>\n

The IRS can get an accurate picture of your financial situation during bankruptcy proceedings. The U.S. Bankruptcy Court staff and the trustee will examine your debts and assets to determine if you qualify for bankruptcy.<\/p>\n

The IRS may become privy to the results of this examination. If the trustee reveals assets or income the IRS was unaware of, it could\u00a0trigger an audit.<\/p>\n

The IRS Can Audit You During Bankruptcy<\/h2>\n

The IRS has the right to audit you when you file for bankruptcy protection. The\u00a0automatic stay<\/a>\u00a0that protects you from most creditors during bankruptcy proceedings does not extend to the IRS.<\/p>\n

According to\u00a0the U.S. Bankruptcy Code<\/a>, the IRS can take the following actions during bankruptcy:<\/p>\n