If your current tax situation is causing you financial distress, it is time to get some help. One option you may have considered is bankruptcy. Bankruptcy can be helpful to get relief from several types of debt, but there are some things to know about bankruptcy and tax debt. Here are some things you need to know:
When Can You Use Bankruptcy to Settle Tax Debt?
It is possible to have some of your tax debt, either state or federal, settled with bankruptcy. Not all of the debt will qualify, however. Taxes are typically non-dischargeable, but there are some exceptions.
What Conditions Must Be Met to Have Tax Debt Discharged?
Before any tax debt can be dealt with in bankruptcy, there are some conditions that have to be met. First, it depends on the type of tax debt you owe. Income tax may be discharged in certain circumstances. Property taxes may qualify for discharge in some instances. If you have any unpaid trust fund taxes, sales taxes, employment taxes, or payroll taxes, they are not dischargeable in bankruptcy. The age of the debt also matters when it comes to bankruptcy. You can only discharge debt that is over a certain number of years old. Your attorney can help you determine if your tax debt is old enough for bankruptcy.
The timeframe in which you filed your tax return can also have an impact on your ability to file for tax relief with bankruptcy. You have to file your return by the tax deadline or the extension date if you requested this timeframe to be considered for tax relief through bankruptcy.
The method you used to file your tax return also matters when it comes to whether or not you can get tax relief through bankruptcy. You must file your taxes legally with an approved form without any type of evasion or fraud involved in your filing. Finally, the IRS or the state tax authority where you live must assess your tax debt within a certain time before you file your bankruptcy claim. Your tax relief attorney can help you make sure you file your bankruptcy on time.
All of these are common requirements for tax debt relief under bankruptcy. However, there are always exceptions to the requirements. Bankruptcy in itself is a complex process but can get even more complicated when you also have to deal with tax debt. You need to meet with an attorney to help you with the process.
Contact a local tax relief service to learn more.
Share29 December 2022
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