Wednesday, October 5, 2011

Can I Wipe Out Back Taxes by Filing Bankruptcy?


The answer is Yes. However, as with most laws pertaining to the Federal Government, there are conditions and certain stipulations. You can discharge back taxes owed to the IRS, by filling a Chapter 7 Bankruptcy, only if the following conditions apply:
1. The taxes must be "income taxes." Payroll taxes or illegal behavior which resulted in penalties can not be discharged in a bankruptcy.
2. You must not have committed fraud or have been found guilty of tax evasion.
3. The tax debt "must" be three years old. This is the stipulation which catches many bankruptcy taxpayers in the cross fire. The tax return must have been originally due, at least three years before you file for bankruptcy.
4. You must have filed "all" of your past due tax returns, including the tax return for the debt you wish to discharge at least two years before filing for bankruptcy.
5. The income tax owed, must have been accessed by the IRS at least 240 days before you file your bankruptcy petition, or must not have been assessed yet. (Consult with your attorney. This rule can change under certain circumstances)
Bankruptcy due to unpaid taxes is not uncommon, and usually is due to lost of income, (job) long term illness or death in the immediate family.
Trying to file for bankruptcy with assets in the hundreds of thousands of dollars may not go over very well with the Federal courts. Speak to an attorney to find out your options. However, before you make the appointment with a BK Attorney, you will need to file "all" of your tax returns. A substitute return, which the IRS has filed for you will not meet the requirements. You must file your own return(s). And in some cases, once taxpayers have filed their past due returns, they have found that the IRS owes them, when all the refunds and amount owed is calculated!
It's a different ball game when you file a Chapter 13 Bankruptcy. Your Attorney can help explain the details, and the approximate monthly payment. At the end of the day, the question you will want to ask your Attorney, concerning a Chapter 13, is: "How much, if anything, will I owe the IRS after my Chapter 13 is discharged?
The IRS is very much aware of the hardships taxpayers are experiencing due to lost of income, illness or death in the immediate family. The IRS has set up the hardship status, for taxpayers who qualify. To learn more on hardship status and if you qualify, call the IRS and ask questions. Just remember, it's a Federal crime to lie to a Federal Agent. Are IRS customer service agents considered Federal Agents? I wouldn't want to be the one to find out. Just be honest, without saying too much.
In order to prepare for Bankruptcy, you will need to file all past due tax returns. We can assist you in the preparation of past year returns. Give us a call at 865-984-6329.
 
Article Source: http://EzineArticles.com/?expert=Cassandra_Ingraham
 
IRS CIRCULAR 230 Disclosure:

Under U.S. Treasury Department regulations, we are required to inform you that, unless expressly indicated, any tax advice contained in this blog post, or any attachment hereto, is not intended or written, to be used, and may not be used to (a)avoid penalties imposed under the Internal Revenue Code (or applicable state or local tax law provisions) or (b)promote, market, or recommend to another party any tax-related matters addressed herein.

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