Will Declaring Bankruptcy Get Rid of My Tax Debt?
Joshua A. Nesser • June 10, 2020
Individuals thinking about declaring bankruptcy most likely are dealing with significant debt owed to several creditors. In many cases, their largest creditor is the IRS and they are left wondering whether filing for bankruptcy will resolve their tax debt.
Whether a tax liability can be discharged depends on several factors, including the type of tax and when it was due. The good news is that, if certain requirements are met, income taxes and related penalties and interest are dischargeable in a Chapter 7 bankruptcy. Unfortunately, other types of taxes, such as payroll and sales taxes, generally cannot be discharged in bankruptcy.
For income taxes to be discharged, each of the following requirements must be met:
- The related tax return was due more than three years ago,
- The tax return was filed more than two years ago,
- At least 240 days have passed since the tax was assessed, and
- No fraudulent conduct in incurring the tax debt.
These timelines can be extended by certain actions, making it more difficult to discharge tax liabilities. In addition, if the IRS files a “substitute for return” in place of you filing a tax return, the tax debt cannot be discharged. Clearly, it is imperative that you understand the rules on dischargeability while you evaluate your options and prepare to file bankruptcy.
If you would like more details, please do not hesitate to call our office. Our office has been successful in helping consumers with collection problems for over 28 years. If you have a debt or tax problem please contact me at (847) 705-7555 or jnesser@lavellelaw.com
and find out how we can help you. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
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