How do I report a self-employed person income on the tax return?

Here the scenario:  A self-employed person declare bankruptcy in July.  The fiscal year end of the business is Dec 31.  Should the income be split between pre & post bankruptcy, just like a normal employee?  Or should all the income be reported under the post bankruptcy return since the fiscal year end is Dec 31, which fall under the post bankruptcy period?

Thanks in advance.

Answer

I believe that, at some point in the distant past, tax returns did ask if a taxpayer was bankrupt and when that occurred.  I cannot see it anymore and as one who studied tax I cannot recall any scenario or teaching that required special treatment for one who is bankrupt.

Given self emplyment, in the manner you describe, the business and the individual are one entity for tax purposes, but ultimately it still does not matter.

When you die... you split some income between pre and post death; I cannot recall anything similar for bankruptcy.  I can see that on bankrupcy, asset values may be affected or impaired due to creditors claims and this may suggest that a separate business statement might be relevant (starting a new business post bankruptcy)... but again (I believe) ultimately unnecessary.

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