Bankruptcy and Taxes

The IRS does not like to talk about the use of Bankruptcy to remove tax liabilities, but the Bankruptcy Code truly serves many interests for taxpayers with delinquent tax liabilities.

If you are getting ready to file bankruptcy regardless of your tax problems it is a good idea to try to include any past tax debt into it. The problem is that many taxpayers file their multi year past due tax returns right before doing the bankruptcy. Such tax debt is definitely does not qualify for discharge. Tax debt has to be at least 2 years old before looking at any other qualification tests. All tax returns have to be filed and tax assessed for 2 years waiting period to start.

Even as a last resort, decision for filing bankruptcy purely for tax debt relief is difficult. Surprisingly, many bankruptcy attorneys do not know much about rules of bankruptcy for federal and state taxes. And rules are indeed complicated. Following 6 steps must be followed in order to qualify:

1. The due date of filing the return is at least 3 years ago

2. The tax return was filed at least 2 years ago

3. A tax assessment occurred at least 240 days ago

4. The returns are not fraudulent

5. The debtor is not guilty of tax evasion, and

6. The debtor must prove the past four years of filings had been filed.

You should seek experienced attorney that specialize in this area. We can recommend you several attorneys. But first let us help you file all outstanding returns, try to reduce your tax balance, negotiate with IRS. We find that in most instances tax bankruptcy is not needed and matters are quickly settled with our help.