Discharging Taxes in Bankruptcy

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.

How To Avoid and Solve IRS Problems

If you owe money to the IRS, it’s not the end of the world. Owing money can be a scary thing, and there’s just not a lot of places and sources that can explain the options. Some of the negative emotions include, anxiety, frustration, and nervous apprehension. You can go to bed and wake up thinking about it. The fear can be so bad for some that it literally consumes their lives. Believe it or not, it’s not uncommon for some people to think they’re being followed by the IRS.

The level of psychological trauma that many experience in this situation can be overwhelming. There are several things that people may not know about the IRS that could help their situation. Deals can be worked out with the IRS. They may not always go through on the first try, but cases can be appealed and eventually won.

There is also a statute of limitations on how long the IRS can attempt to collect on back taxes. The bottom line is that IRS problems can be solved with the right knowledge and help. Unfortunately, the vast majority of people suffer agony because they simply don’t have access to the knowledge of how to deal with their situation. This is why it’s important to consult with a knowledgeable tax attorney.

Tax Secrets You Should Be Aware Of

Quite naturally, there’s a lot of confusion about IRS practices; what they can or cannot do to people who are behind on their tax payments.

Here are several secrets that you should know about the IRS.

#1. The IRS can seize your home if you’re behind on your taxes. This is not generally the case. However, there are circumstances where they can seize a homestead. It does happen when people openly claim that taxes are unconstitutional. These people get singled out for special attention by the IRS.

#2. Tax debts do not have to haunt you for the rest of your life. Often, people that own their own business or who are private contractors fail to file taxes and sometimes skip for five years or more. If you’re behind on payments, quickly find a way to negotiate a payment plan with the IRS. Don’t let the penalty build up until you’re totally in over your head.

#3. The IRS has ten years in which to collect on unpaid taxes. If it doesn’t collect before then, the debt is written off. Interest and penalties can quickly add up. There are cases where a $5000 tax bill turns into a $300,000 penalty.

The IRS has a lot of power to collect taxes. Consult with an experienced tax attorney if things have gotten out of control.

What Is The IRS Fresh Start Initiative Plan?

In 2012, the IRS introduced a Fresh Start Initiative plan that consists of two parts.

1. The IRS eased the tax payment requirements for taxpayers who owe $50,000 or less. If a person owes $50,000 or less and they haven’t defaulted on a previous installment agreement in the last five years, he or she might qualify for a streamlined installment agreement plan.

2. When an IRS tax lien is filed against a person, it tells the world that a person owes money to the IRS. This lien can affect your credit, buying a house, or securing a loan. There are a lot of negative things associated with having a tax lien levied against you.

If you can enter into a streamlined installment agreement and can make your first three payments using their direct debit option, the IRS will go ahead and release your federal tax lien. This is a good thing. The Fresh Start Initiative is an indication that someone in the government finally got things right.

It’s almost next to impossible for the average person to understand all the nuances associated with taxes and installment plans. A person’s best option is to seek the help and advice of a qualified tax attorney in these matters.

What You Should Know About IRS Installments

No one relishes the idea of falling behind on their taxes. However, life happens had you’re still required to pay your taxes. There are three types of installment agreements that you can make with the IRS. An installment agreement is simply a payment plan.

#1. Streamlined Installment Agreement – The IRS will break up a person’s total liability into monthly installments. Under this plan, people are required to pay their debt in full. This is the plan that most people, who owe the IRS, would prefer.

#2. Classic Installment Agreement – If you owe $50,000 or more in back taxes, the IRS will determine, using their allowable expense standard, how you can afford to pay. This installment agreement usually doesn’t fare well with individuals who owe money to the IRS.

#3. Partial – Pay Installment Agreement – It operates under the Collection Statute of Limitations. This means that if you owe the IRS money, they have ten years in which to collect. There are things that can add time to the limitation, but generally speaking, the IRS has a ten-year window of opportunity to collect what’s owed.

The good news is that the IRS rarely requires an extension past the ten-year limitations period. For individuals, navigating the IRS collections system can be challenging without the help of a qualified tax attorney.