There is a great deal of stress upon those people considering bankruptcy. People cannot afford to pay their bills. Creditors begin to call, harass and threaten as people try to juggle the issue of how and when to pay their bills. Feeding their family and maintaining a home are also high on the list of priorities. If an IRS debt is also involved, the stress can be overwhelming.
Bankruptcy Court is not the ideal place for fighting tax debts as most are not dischargeable. If you have no where else to turn, however, it may still be possible to get help in bankruptcy.
If you file bankruptcy, your credit cards and medical bills can be discharged. This will give you the opportunity to use that extra income to pay off your tax debt. Of course, you should discover whether or not your tax debts meet the requirements of the bankruptcy code for a discharge.
Five requirements are needed if your tax debt to the IRS is to be deemed dischargeable:
They must be income taxes, first of all. They cannot be payroll taxes or excise taxes or any other kind of tax debt.
Secondly, the debt must have come at least three years prior to the bankruptcy. Usually, the date for a tax is April 15 the year after you incurred the debt.
If you owe taxes on income earned in 2009, for instance, the date the tax came due would normally be April 15, 2010. Therefore, a person seeking to discharge this debt could not file for bankruptcy until April 15, 2013 at the earliest.
Thirdly, a debtor must show that they filed the tax return for this particular debt at least 2 years before seeking a discharge in bankruptcy. For the above mentioned example, a tax return for the 2009 income tax debt needs to have been filed on April 15, 2011 at the latest. The bankruptcy code punishes those people who do not file returns timely on tax debts they later seek to discharge.
Fourth, you must not have committed fraud or tried to evade paying on the taxes. Filing tax returns with false social security numbers or other methods of avoiding the tax will make it ineligible for discharge.
Lastly, you must pass the 240-day rule. This states that if the tax was assessed within the 240 days prior to filing, then it will not be eligible for a discharge. You can request documentation from the IRS that will tell you when the tax was assessed.
If the five requirements are met, then the tax debt can be discharged in bankruptcy. There are more considerations, however, that can complicate the matter.
The first is that Chapter 7 will not get rid of a federal tax lien. If the IRS has recorded a tax lien on your property, then this discussion is moot.
A second additional factor that needs to be considered is that you need a ruling from a bankruptcy judge in an adversarial proceeding within your bankruptcy petition. You must sue the IRS and win in order for a tax debt to be discharged.
Suing the IRS can be quite costly and will go well beyond the low flat fee your attorney charges for the petition. A battle with the IRS can be costly but if your tax debt is substantial and meets the requirements, it could be well worth the fight.
If one or more of the above factors make it hard to discharge the tax debt, you will need to find another way of dealing with it. As described above, a Chapter 7 petition can eliminate enough debt to give you an opportunity to afford to pay off the tax debt. If the IRS won't work with you, a Chapter 13 Bankruptcy can give you 3-5 years to pay off the debt as well.
Ignoring these problems usually does not work. Many solutions exist to help you if you are drowning in debt. If you are facing bankruptcy and owe the IRS, look to these five factors to see if that debt might be discharged. And talk with your attorney about the chance to fight this.
Bankruptcy Court is not the ideal place for fighting tax debts as most are not dischargeable. If you have no where else to turn, however, it may still be possible to get help in bankruptcy.
If you file bankruptcy, your credit cards and medical bills can be discharged. This will give you the opportunity to use that extra income to pay off your tax debt. Of course, you should discover whether or not your tax debts meet the requirements of the bankruptcy code for a discharge.
Five requirements are needed if your tax debt to the IRS is to be deemed dischargeable:
They must be income taxes, first of all. They cannot be payroll taxes or excise taxes or any other kind of tax debt.
Secondly, the debt must have come at least three years prior to the bankruptcy. Usually, the date for a tax is April 15 the year after you incurred the debt.
If you owe taxes on income earned in 2009, for instance, the date the tax came due would normally be April 15, 2010. Therefore, a person seeking to discharge this debt could not file for bankruptcy until April 15, 2013 at the earliest.
Thirdly, a debtor must show that they filed the tax return for this particular debt at least 2 years before seeking a discharge in bankruptcy. For the above mentioned example, a tax return for the 2009 income tax debt needs to have been filed on April 15, 2011 at the latest. The bankruptcy code punishes those people who do not file returns timely on tax debts they later seek to discharge.
Fourth, you must not have committed fraud or tried to evade paying on the taxes. Filing tax returns with false social security numbers or other methods of avoiding the tax will make it ineligible for discharge.
Lastly, you must pass the 240-day rule. This states that if the tax was assessed within the 240 days prior to filing, then it will not be eligible for a discharge. You can request documentation from the IRS that will tell you when the tax was assessed.
If the five requirements are met, then the tax debt can be discharged in bankruptcy. There are more considerations, however, that can complicate the matter.
The first is that Chapter 7 will not get rid of a federal tax lien. If the IRS has recorded a tax lien on your property, then this discussion is moot.
A second additional factor that needs to be considered is that you need a ruling from a bankruptcy judge in an adversarial proceeding within your bankruptcy petition. You must sue the IRS and win in order for a tax debt to be discharged.
Suing the IRS can be quite costly and will go well beyond the low flat fee your attorney charges for the petition. A battle with the IRS can be costly but if your tax debt is substantial and meets the requirements, it could be well worth the fight.
If one or more of the above factors make it hard to discharge the tax debt, you will need to find another way of dealing with it. As described above, a Chapter 7 petition can eliminate enough debt to give you an opportunity to afford to pay off the tax debt. If the IRS won't work with you, a Chapter 13 Bankruptcy can give you 3-5 years to pay off the debt as well.
Ignoring these problems usually does not work. Many solutions exist to help you if you are drowning in debt. If you are facing bankruptcy and owe the IRS, look to these five factors to see if that debt might be discharged. And talk with your attorney about the chance to fight this.
About the Author:
If you feel you are drowning in debt, call a Seattle Bankruptcy Lawyer today. It is quite possible that many of your stressful problems can be eliminated in a Chapter 7 Bankruptcy.. Check here for free reprint license: Discharging Taxes In Bankruptcy.
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