Bankruptcy and Tax Relief - By: John Hajewski

Many people that are under economic stress have both large amounts of

unsecured debt and large amounts of back taxes owed the Internal revenue

service. Many of these people think that if/when they file bankruptcy, their

tax debt is going to be dissolved. Also, you can find unscrupulous bankruptcy

attorneys out there who may assure the individual that this assumption is

correct.

About.com spells it out thus: “Chapter 7 provides for full discharge of

allowable debts. Chapter 13 provides for a repayment schedule to repay some

debts, with the remainder of debts discharged. Under the new bankruptcy laws,

some tax debts are treated the same way in both Chapter 7 and Chapter 13

petitions.

But not all tax debts are capable of being discharged in bankruptcy. The

bankruptcy petitioner will need to have tax debts that meet five criteria for

discharge.”What are these criteria you ask? 1. The due date for the filing of

said taxes is at least 3 years old. 2. The tax return was filed at least 2

years prior. 3. The assessment must be at least 240 days old. 4. The tax

return was not fraudulent 5. The taxpayer is not guilty of tax evasion.

It's Essential To file your tax returns to enable the related tax to be

dischargeable in a bankruptcy. If the IRS had to file returns for a taxpayer

because the taxpayer never filed them, those returns don’t count! (You can

and should file “reconsideration” returns if this ever happens to you.)

Remember, you need to bring your 3 or 4 most recent tax returns to your

attorney’s office if/when you file bankruptcy, so a good attorney will know

if your back taxes are dischargeable completely (Ch.7) or partially (Ch.13).

Now, since we mentioned “Tax Relief” in the title of this article, we want to

mention another angle to this subject. The scenario: You want to file an IRS

offer in compromise, but you have old tax debt that may be dischargeable in a

bankruptcy. Here’s what you do: 1. Call a good enrolled agent or tax

resolution firm. (Look for the A Rated Better Business Bureau mark, (EXAMPLE:

http://www.taxrelief4america.com ) 2. Ask to speak to an agent, and make sure they

know your issue. They will be able to pull your records and transcripts and

tell you within very close detail what taxes the IRS will discharge in a

bankruptcy. This can help you “time” your bankruptcy. Another thing they can

do is (for a fee) help file your offer in compromise for the remainder of the

taxes once your bankruptcy is discharged. Note: If you are currently in

bankruptcy status, you MAY NOT file an offer in compromise. You must wait for

discharge. Normally, this is 4-5 months for Chapter 7 filers, and 3-4 years

for Chapter 13 filers. You can see that it’s best to file the bankruptcy

first, since this puts your IRS collections account on hold and may even

discharge some taxes.

One more thing - make sure that you do NOT accrue new delinquent tax debt

while your bankruptcy is still in process, either with the IRS or your

individual State. This can and will void and default your bankruptcy, and you

will be back where you were at the start. This is not what you want.

About the Author

For more assistance, contact: http://www.taxrelief4america.com

Article Directory Source: http://www.articlerich.com/profile/John-Hajewski/215863

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