Bankruptcy and Unpaid Income Taxes
Certain income tax debt may qualify for discharge through bankruptcy but you need to have your income taxes filed. It is unlikely bankruptcy will wipe out unfiled tax debt but there are specific requirements that need to be met in order for tax debt to be successfully discharged. Chapter 7 bankruptcy may be an option to eliminate certain tax debt if it qualifies, but Chapter 13 bankruptcy may help repay what you owe with manageable payments.
Determining Whether or Not Unpaid Taxes Can Be Discharged
In determining whether or not unpaid taxes can be discharged you’ll need to review your situation and understand where you stand. Unpaid taxes often result in unfiled tax returns. One of the requirements needed in order for tax debt to be considered for discharge includes being up to date on tax filing. Chapter 7 has several requirements that include having tax returns filed for at least the last 2 years if the return was due within the last 3 years. The debt in question should also be accessed by the Internal Revenue Service (IRS) within 240 days of your bankruptcy filing.
If you have yet to file your returns, you may need to seek assistance from a tax professional to get caught up and review payment options with the IRS. Another option to help you make payments on outstanding tax debt is Chapter 13 bankruptcy. In Chapter 13, a repayment plan is created based on your income and living expenses. The plan is approved by the court which may last up to 5 years; meaning the IRS is forced to settle on the payment arrangement.
Concerned Your Unpaid Income Taxes? Perhaps Bankruptcy Can Help
If you aren’t sure what to do regarding your unpaid income taxes and considering bankruptcy, you can contact us today to receive a free consultation. We are always here to help.