Bankruptcy is a common form of debt relief that individuals use to get a fresh start in their finances. Bankruptcy can help people get rid of overwhelming credit card debt, overdue medical bills, personal loans, and more. But does it help get rid of tax debt? Our Tampa tax debt relief attorneys explain if bankruptcy can be used to get rid of tax debt below.
Can Bankruptcy Help Me Eliminate Tax Debt?
Yes, in certain circumstances, bankruptcy can be used to get rid of tax debt. Many individuals file for Chapter 7 bankruptcy to get rid of tax debt in as little as four months. However, only certain types of tax debt can be discharged through bankruptcy.
Below are the qualifications needed to eliminate your tax debt through bankruptcy:
Your tax debt must be from your income taxes: Other taxes, such as payroll taxes and fraud penalties, cannot be discharged through bankruptcy.
Your tax debt must be at least three years old: Tax debt that is less than three years old cannot be discharged through bankruptcy.
You filed a tax return the last two years: You can only eliminate taxes that are three years old if you filed your tax returns in the last two years.
You pass the “240-day rule”: The IRS must assess the income tax debt at least 240 days before you file bankruptcy.
What If I Don’t Qualify?
If you don’t meet the qualifying criteria listed above, there are other options available to help you get rid of tax debt. You can file an offer in compromise to get rid of tax debt if you can prove that paying your taxes would cause undue hardship (would cause financial difficulties to your living situation). You can also obtain installment agreements – which are payment plans with the IRS.
Get in touch with our Tampa tax debt relief attorneys at (813) 295-7648 to learn more about your options!