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Getting Rid of Back Taxes in Bankruptcy and What You Should Know

Posted By Allmand Law Firm, PLLC || 10-Mar-2014

Back Taxes in Bankruptcy

Bankruptcy can help you eliminate back income taxes depending on your situation and qualifications. You can file Chapter 7 bankruptcy to discharge tax debt that qualifies under the bankruptcy code. If your debt does not meet these qualifications, you may consider Chapter 13 bankruptcy to help you repay what you owe based on your income ability.

While it is important to review your situation with a qualified tax professional or bankruptcy attorney to learn how you may qualify, the following points are few things you should know about eliminating back taxes in bankruptcy:

  • To discharge tax debt in Chapter 7 the debt should have been due three years prior to filing. This includes extensions you may have received during this time.
  • Prior to filing your returns should be filed, even past due taxes roughly two years before bankruptcy.
  • The Internal Revenue Service (IRS) must assess the debt at least 240 days before you file your case. The 240-day period may vary depending on any events that may have occurred during the time period.
  • Tax returns may not be considered fraudulent; information provided should be true. Tax evasion should not have been attempted.
  • Even if tax debt meets requirements under the bankruptcy code it will not be discharged unless back taxes have been filed. A substitute return, sometimes completed by the IRS when the taxpayer does not submit a recent return, does not count.

You can review your tax debt with an expert to review your options, including Chapter 13 bankruptcy which helps reorganize debt obligations based on your ability to make monthly payments.

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