In Some Cases Tax Debts Can Be Discharded Through Bankruptcy
When people hear about bankruptcy, the one thing that is repeated is that taxes cannot be discharged with a bankruptcy, but this is not accurate. Although certain taxes cannot be discharged, under certain qualifying conditions, income taxes can be discharged. Income taxes can also be reduced and a payment plan created. It is important to consult with a bankruptcy attorney because the laws in this area can be difficult to understand, but if they can be applied to your situation, an attorney can explain it to you without legal jargon.
Before you can qualify for elimination or reduction of taxes, you must first qualify for a bankruptcy. There are two types of bankruptcies for an individual; they are referred to as Chapter 7 and Chapter 13.
Chapter 7 is one that discharges all of your debts with a few exceptions such as back child support, certain court judgments and taxes.
Chapter 13 is one that reorganizes your debts into a payment plan. This plan is for a fixed amount of time, and when the last payment is made, the bankruptcy is concluded.
To qualify for a bankruptcy there are certain income limits, and there is also a limit to the value of many assets. A bankruptcy attorney can help you determine if you qualify. Chapter 13 is easier to qualify for than Chapter 7, but both types of bankruptcy allow for taxes to be discharged or reduced if certain conditions are met.
Keep in mind that a bankruptcy judge has authority over the debts owed to the state and federal government, but they still must operate within the laws.
For a tax debt to qualify for consideration by a judge it must be an income tax debt.
Property taxes do not qualify nor do any taxes in which a lien has been made by the government.
The tax must be an income tax liability that is more than three years old.
The money owed must have been from a tax return that was filed at least two years ago.
The taxes owed were assessed at least 240 days ago.
Under these circumstances, you may be able to eliminate or reduce your taxes owed.
In a Chapter 13 bankruptcy, you may be able to reduce the amount or have them completely eliminated in a Chapter 7 filing.
It should also be pointed out that it is possible to negotiate with the Internal Revenue Service over back taxes and even create a payment plan without a bankruptcy, but this should never be done without the help of an attorney.
As a local Salt Lake Tax Attorney concentrating in IRS Problem Resolution, I can help you decide if Bankruptcy is the right solution to your IRS tax debt problem. Please call Gilland Law Firm, P.C. for your free consultation at (801) 444-9302 or email Salt Lake Tax attorney Jim Gilland for your free IRS Tax help consultation.