Few people know that you can totally eliminate your taxes if you are declared a bankrupt. The fact is that you can discharge your taxes through bankruptcy, provided you adhere to a set of strict rules. Your bankruptcy lawyer can give you further details on these rules and to the credit of the IRS, it isn't a complicated list to remember. If you have a tax burden you want to get relief from, consider filing for bankruptcy. Despite the stigma attached to it, bankruptcy is a legitimate means for getting out of crippling tax debt.
Most people fall on financial hard times, regardless of the reasons. The IRS may demand that you also settle your tax debt, increasing the money owed to creditors. The IRS can be quite unforgiving, unlike other bill collectors. They can effectively wreck a taxpayer's life if they want to continue specific collection methods. Filing for bankruptcy offers a degree of protection against the IRS's worst debt collection techniques.
Bankruptcy is a negative term, and with new amendments in the law, it is now also a mind-boggling word. However, it is the only resort for a lot of people. Understanding what bankruptcy is, what the filing needs and guidelines are, and the nitty-gritty of the process is important if you think this is your last alternative to get away from financial mishap. To add, it is a wonderful move to consult a Tampa tax professional if you intend to resort to filing for bankruptcy.
A taxpayer may have the right to discharge back taxes in a chapter 7 bankruptcy. Filing chapter 7 is a way to eliminate back taxes if you meet the conditions for discharging those back taxes. Chapter 7 will completely eliminate qualifying debt, including back taxes. Under recently updated bankruptcy laws back tax debt is treated the same in both chapter 7 and chapter 13 filings. However, not all back tax debt qualifies for discharge in a bankruptcy. There are five conditions that must be satisfied for back taxes to be discharged in chapter 7 bankruptcy, and these conditions apply to each tax year, each tax return and each tax assessment independently. If back income taxes tax satisfy these conditions they may be discharged in chapter 7. The five conditions back taxes must meet to be discharged in chapter 7 are: the tax return must be due at least three years ago, the tax return must have been filed at least two years ago, the tax assessment (there may be multiple assessments in a given tax year) is at least 240 days old, the tax return is not fraudulent and the taxpayer is not guilty of tax evasion.
Last post we began a discussion on the July 23rd article in the Wall Street Journal online edition. In the first post of this series we mentioned the consideration of other solution alternatives outside the OIC and an Installment Agreement. The solutions considered in the WSJ article completely ignore the possibility of bankruptcy in eliminating a tax liability. There are some tax liabilities that are never dischargeable in a bankruptcy proceeding, chiefly; the Trust Fund portion of Payroll Taxes, taxes assessed by a Substitute for Return (when a taxpayer fails to file a return and the IRS files one for him or her) and Civil Penalties (not to be confused with penalties and interest associated with failure to file, failure to pay, and paying late which are dischargeable). However, contrary to the prevailing perception, bankruptcy can be a reasonable alternative in eliminating an outstanding tax liability.