Discharge Tax Debts in Bankruptcy

Tax Debt Discharge and Bankruptcy

If you have large tax debts that you cannot seem to pay off with the high penalties and interest attached to them, then you might be surprised to find out that it’s possible to have those debts discharged in bankruptcy court. There are of course, stipulations and certain criteria you must meet in order to file bankruptcy on your tax debt.

The first criteria to be met is that you have filed a legitimate tax return for the year the debt incurred. Secondly the tax return must have been filed at least 2 years before you file the bankruptcy claim. The third criteria is that the IRS has not examined your liability for the owed taxes within 240 days before you intend to file.

If all the requirements are met above, then you can in most cases have your tax debt discharged through the bankruptcy court. If you had incurred penalties for the tax debt, those too can be discharged from your debt. There are courts that are split on whether you can discharge penalties on un-dischargeable underlying debt. An example is if you had used a credit card to pay taxes that are not dischargeable, then the amount on the credit card cannot be eliminated in a chapter 7 bankruptcy filing.

If you did not file a tax return or had been intentionally avoiding tax bills, then you cannot discharge your tax debt in the bankruptcy court. If the IRS filed a return on your behalf, this is still considered a non-return or non-filing and will prevent the tax bill from being discharged. Property taxes can be discharged in bankruptcy as well, as long as they are more than a year old when you file the claim. If property taxes are not paid, they will remain as a lien on your home and eventually lead to foreclosure. Taxes such as trust fund taxes and payroll taxes are never allowed to be included in the bankruptcy discharges.

There may be ways to discharge your tax bill, but it requires an experienced and knowledgeable attorney to get it done right. Call 312-273-1217 today and schedule a free appointment with a reputable attorney who can offer professional advice and customize options for your financial freedom. Night and weekend appointments are available and all of our 8 locations have free parking.


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By Kerrie Neal

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