Bankruptcy Can Help Resolve Your Tax Problems
When it comes to tax debt , most of us believe that the only way to get the IRS off our backs is to grit our teeth and pony up the penalties. However, while common wisdom may indicate that the only certainty in life is death and taxes, that isn’t always the case – especially if you resort to filing for bankruptcy to solve your tax problems. While bankruptcy cannot eliminate some debts owed to the federal government, there are several types of taxes that can be eliminated under a Chapter 7 or Chapter 13 bankruptcy .
Therefore, if the IRS is knocking on your door or you believe you won’t be able to pay tax debts from previous years, here is what you need to know about solving your tax problems via bankruptcy:
- The types of taxes that can be discharged through bankruptcy will depend on whether you file for Chapter 7 or Chapter 13 bankruptcy. For the taxes that you can’t discharge through a Chapter 7 bankruptcy (these will likely be your most recent bill to the IRS), you might be able to pay them off through a Chapter 13 bankruptcy without being penalized with interest payments. Be sure to talk to your bankruptcy attorney about which bankruptcy option is the right one for your specific financial predicament.
- While the type of taxes owed will ultimately determine if they can be dismissed, the general rule of discharging taxes via bankruptcy is this: if you faithfully filed honest and detailed income taxes, and the taxes owed are older than three years from the date of your bankruptcy, then the courts can discharge these debts. However, take note that the IRS will go through your old tax returns with a fine-tooth comb – therefore, if they discover any inaccuracies or dishonesty in your tax returns, you’ll lose your right to discharge your old tax debts.
- Keep note that your tax returns could end up getting your bankruptcy petition dismissed. If you file your tax return late – or fail to file one at all – during the course of your bankruptcy petition, you could end up seeing your case entirely dismissed. So whatever you do, stay on top of your tax return.
Bankruptcy could be the ultimate solution to your tax problems. Talk to your bankruptcy attorney today to see if it’s the right solution for your financial situation.