Let’s tackle your tax problem
Most people are not aware that you can actually eliminate individual income taxes in a Chapter 7 bankruptcy. There are five basic requirements to discharge older individual income taxes. In general, the following requirements must be met:
- The Three Year Rule. The bankruptcy must be filed more than three years after the due date (including extensions) for filing the tax return.
- The Two Year Rule. The bankruptcy must be filed more than two years after the date you filed your tax return.
- The 240 Day Rule. The bankruptcy must be filed more than 240 days after the taxes were assessed.
- The No Fraudulent Tax Return Rule. Your taxes will not be discharged if you filed a fraudulent tax return.
- The No Tax Evasion Rule. Your taxes will not be discharged if you attempted to “willfully” evade paying taxes.
I am sure your head is spinning right now. Tax issues in bankruptcy are extremely complex. In general, recent taxes (last three years) are not discharged in Chapter 7 bankruptcy. However, if your taxes are older than three years, and if you meet the other four requirements above, your taxes can be eliminated in Chapter 7.
In the event your taxes can not be discharged in Chapter 7, there are other options we can recommend. The following options may be available:
- Chapter 13 Bankruptcy. This form of bankruptcy is a repayment plan. The taxes can be repaid over a three to five year period. The payment plan would also include your other debts such as credit cards, medical bills, signature loans. These debts may be paid pennies on the dollar while your IRS debt gets paid in full.
- IRS Installment Agreement. We can negotiate monthly repayment plan with the IRS.
- IRS Offer and Compromise. We can negotiate a lump sum settlement of your tax obligations usually at a discount.
Dealing with the IRS can be very stressful. If you are experiencing tax problems we are here to help. Lewis & Jurnovoy, PA offers a free initial consultation to attempt to find the best solution to your tax and financial problems. Please call us to set up your free appointment