Discharging taxes in bankruptcy remains a mystery to many. Most people think that taxes cannot be discharged through a bankruptcy. Wrong! Nothing could be further from the truth. Your taxes can be discharged through filing bankruptcy.
There are three rules for discharging tax liabilities through a chapter 7 bankruptcy.
#1. The returns need to be owed for at least three years, including extensions.
#2. The returns, if filed late, must have been filed for at least two years.
#3. The taxes must have been accessed for at least 240 days.
Additional allowances for discharging taxes through a bankruptcy
may include no fraud having been involved, and not attempt to have avoided paying taxes. A chapter 7 bankruptcy, in most states, will wipe all your debts and you get to keep your assets. Of course, there are lots of exceptions, details, and rules. You should take time to talk with qualified bankruptcy counsel.
What you need is a detailed analysis of your situation by a qualified IRS Lawyer. The importance of finding competent representation can’t be stressed enough. There are simply too many critical elements involved that pertain to filing taxes and bankruptcy rules not to have a professional representing your best interests. Contact your tax or bankruptcy attorney today.
Just about everyday I’m asked this question, can bankruptcy help with IRS problems?
Most people think, or don’t even consider as a possible option for owning the IRS.
They are under this misconception that the IRS is some sort of super critter and bankruptcy can never discharge taxes at all, and that is simply not the case.
What Are the Three Different Types of Bankruptcies?
The first is chapter 7, you consider, you can think of a chapter 7 as something like liquidation bankruptcy, but since the exemptions particularly in the state of Florida are so good, particularly as they apply to your homestead to your home, your real property it’s not so much of a written obligation as much you get to liquidate your debts, your tax debts, if everything works out right.
The second is a chapter 13 bankruptcy and this is what many people consider sort of a repayment, a reorganization sort of bankruptcy.
Typically you will be making payments back, some percentage, of your back over a 60 month period. The third type of bankruptcy we’ll talk about for taxes is actually chapter 11.
Chapter 11 are typically thought of as business bankruptcies and they can be useful in helping to deal with payroll tax problems because, although payroll taxes are never dis-chargeable in a chapter 11, the interest and penalties can be, so you can actually force the IRS into a 5 year payment plan with no penalties and no interests which would consider you a significant amount of money or what time.
But back to the chapter 7 and the chapter 13 there’s tiny rules that I want to explain to you. Now it took me a couple years to really to get these ingrain, so at least I want you to be aware of them. But the first timing rule is the returns would have to been due for at least 3 years including extensions.
So a 2011 return is due April 15th of 2012, but if you ask for an extension, that would’ve been October 15th, 2012 plus three years that means that tax return, that 2011 return cannot be discharged until October 16th, 2015 at the very earliest.
The second timing rule is that the tax returns, if they have been filed late, have to have been filed for at least 2 years. The third timing rule is the tax assessments would have to have been filed for at least 240 days.
So those two timing rules actually apply to both chapter 11, chapter 13, and through an individual chapter 11. Not typically a business chapter 11 because typically that business chapter 11 is dealed with payroll tax obligations, which are never technically dischargeable on bankruptcy.
So I know that was a lot of information, but the thing to take away from this video is that taxes can be discharged in bankruptcy and under certain circumstances that you need someone who really does this all the time to help you figure it out.