As a general rule, you can discharge taxes in bankruptcy if you meet the requirements. But like most rules, there are complexities. The bankruptcy law actually provides that income taxes are dischargeable. But only if you meet all the right criteria. Briefly, here are the requirements.
To Discharge Taxes in Bankruptcy:
- The taxes are more than three years old. A three-year period must run from the time the returns were due. Plus add time for any periods of extension. Of course, this is all based on the bankruptcy filing date.
- If the return was not filed on time you still have hope. You need to have more than two years since the return was filed;
- There has to be more than 240 days from the date of assessment before the bankruptcy is filed;
- You must not have committed tax fraud.
JEFF’S TIP: Get accurate information. You need exact dates. We recommend that you obtain a complete tax history. You need that for each specific year. Get that from from the IRS. You may be able to get it online direct from the IRS, HERE. Or, call the IRS at 800-829-1040. Ask them for a report called “Tax Account Transcript”. Tell them you want it for each year you owe for. They will mail you the reports. They might even fax them if you ask them nicely. Bankruptcy discharge does not automatically remove any tax lien. Tax liens stay on any property which you own. The IRS might agree to abate the liens of there is no equity in the asset. Next, consult a tax professional before filing the bankruptcy. Jeff Wishman is a Los Angeles bankruptcy lawyer with 37 years of experience!
Help for Taxes You Still Owe After Bankruptcy.
You want your taxes to be discharged. But that can’t always happen. If you are left with tax debts your situation is not hopeless. There are still things you can do. Most tax debts can be handled. We have some great suggestions to deal with the most common tax situations. Here are some important updates and tips.
- INSTALLMENT AGREEMENT: An installment agreement is simply a payment plan. The IRS has recently streamlined the
procedure. Taxpayers owing under $50,000 can apply for an installment agreement. You won’t have to hand over detailed financial records. This is up from the old amount. The old amount was $25,000. So, it is now easier to qualify for a payment plan.
- PARTIAL PAYMENT INSTALLMENT AGREEMENT: Helpful where you will not realistically be able to pay the non dischargeable tax debt. But the IRS may want to file a new lien. Agree to extend the partial pay beyond the collections statute of limitations in negotiating to avoid a new lien. But ask your tax pro before you agree to anything.
Taxes are tricky. We recommend you obtain the services of an experienced CPA or a tax attorney. It is helpful to have such advice BEFORE you file bankruptcy.
Synopsis: As a general rule, you can discharge taxes in bankruptcy if you meet the requirements.
Key Word: Discharge Taxes in Bankruptcy