Can Bankruptcy Help Me With My Tax Problems?

Posted by williamsmith21 on October 26th, 2016

It depends on a variety of factors. Although declaring bankruptcy can help with taxes, it is most times, not the one-stop solution that many people envisage. Bankruptcy can help you do away with some tax debts and help you cope with some others. However, the law is complicated and this article is meant to offer you a general overview of the situation and what it means.

Help Available In Bankruptcy

As mentioned above, bankruptcy does not usually offer the quick discharge of tax debts like it does for most credit card debts, medical bills, and some other dischargeable debts. However, it is important to note that income tax debt could be discharged in some cases. Whether it is qualified to be discharged actually depends on the tax year that it became due. Under the bankruptcy law, it is actually possible to discharge income debt if you have owed the taxes for more than three years. Also, if any extensions were granted by IRS, 3 years must have elapsed since the extended due date.

You can also discharge your tax debt if you filed for bankruptcy at least two years after filing the tax return for the taxes in question. Your ability to get a discharge will be severally impaired if you filed the return late. You can be allowed to discharge your tax debt if the tax debt was assessed at least 240 days before filing for bankruptcy. You can also be considered for tax debt waiver if your tax return did not contain any intentional misrepresentation or tax evasion attempt.

However, in the situation where your income tax debt cannot be discharged under the law, bankruptcy can be used to make it easier to pay off the taxes. If you owe other debt that surpasses your tax debt, chapter 7 bankruptcy can be deployed to eliminate most of those debts. This will afford you the opportunity to devote more of your financial resources toward your tax debt clearance.

Can Property Tax Be discharge?

Yes, property debt is dischargeable in some circumstances. Property tax may be dischargeable if the bankruptcy is filled at least one year after the last date that tax could have been paid without penalty. However, if the property has become a lien, it cannot be discharged. As with income and all other taxes, an attorney can assess your tax debt and help determine whether they are dischargeable.

Chapter 13 may be a better solution if you primarily owe tax debt or would need more time to pay your taxes. During this type of bankruptcy, your tax debt would become part of the repayment plan, affording you the opportunity to pay your tax in monthly installment over 5 years. While the plan is in effect, the Internal Revenue Service many not garnish your wages or utilize other means to collect the delinquent debt, as long as the payment is made every month.

Speak With an Attorney

Bankruptcy is just one way to tackle income tax issues. As such, it may not be the most appropriate in all cases. If you owe some taxes, it would be wise to speak with an experienced bankruptcy attorney who can help analyze the situation and recommend the most effective method to ameliorate your tax problems.

The Sexton Law firm has bankruptcy experts that can help you explore other viable solutions for your tax debts. These solutions may include Offer in Compromise, installment agreements, Currently Not Collectible status, Injured Spouse relief, Innocent Spouse relief, and other remedies.

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