You may have heard that filing for bankruptcy can help you eliminate your past tax debts – and this could be the case. But, don’t count on getting relief from all of your IRS obligations.
In order to be dischargeable through bankruptcy, back taxes need to meet certain conditions. To learn whether your IRS debts will be forgiven when you file, ask yourself the following questions.
Are Your Debts from Income Taxes?
Federal and state income taxes are the only types of IRS debt you can erase by filing for bankruptcy. If your tax debts aren’t income-based, they will not qualify for discharge.
When Was the Tax Return Due?
To meet the guidelines for discharge, the income taxes you owe must be from a return that was due at least three years ago. So, if your tax return deadline was April 15, 2016 and you didn’t request any extensions, the debt won’t be dischargeable unless you file for bankruptcy after April, 15, 2019.
When Was the Tax Return Filed?
For your past income taxes to be wiped away, you must have filed the return at least two years prior to filing for bankruptcy. Substitute returns filed on your behalf by the IRS don’t usually count, but some courts may make an exception if you meet all of the other criteria.
When Did the IRS Assess the Tax Debt?
To qualify as dischargeable in bankruptcy, your debts must meet the 240-day rule. In other words, the IRS must have assessed the taxes – or entered the liability in their records – at least 240 days before the date of your bankruptcy filing. Keep in mind, though, that if the IRS suspended collection activity due to an offer in compromise or a former Chapter 7 bankruptcy case, this time period can be lengthened.
Has the IRS Placed a Tax Lien on Your Property?
If your back taxes total $10,000 or more, the IRS might have filed a lien on your property. In that case, filing for bankruptcy won’t wipe out your obligation to pay the debt. A lien turns your taxes into a secured debt, which means that the IRS could seize your property and sell it to recover what you owe.
Do your tax debts qualify for discharge? Should you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy? What are your options for managing nondischargeable IRS debts? For answers to these questions – and all of your other questions about filing for bankruptcy – turn to the Law Office of Davis & Jones, P.C.
Our bankruptcy attorneys have a combined 40 years of legal experience, and we’ve helped more than 20,000 Utah residents regain their financial footing by consolidating and discharging their debts. If you need expert advice about filing for bankruptcy, contact the Law Office of Davis & Jones, P.C., and schedule a free consultation today.