Taxes: Don’t Let the IRS Empty your Pockets

By admin • April 15th, 2011

It’s that dreadful time of year again: tax season. Those who are brave enough to file are usually rewarded with a sizable refund or, alternatively, a friendly notice informing them of the large amount they owe. If you fail to pay taxes owed to the IRS by the April 18th deadline, you will face large penalties and fines. Instead of avoiding tax season and dodging your income tax owed, let us explain some other options.

Through bankruptcy, you may be able to discharge tax debts. A Chapter 7 bankruptcy permits a full discharge of allowable debts. A Chapter 13 bankruptcy permits a payment plan to repay some debts, including tax debts. Under this Chapter you are able to make tax payments at a 0% interest, in comparison to the usual 3% from the IRS. In order for a tax debt to qualify as being dischargeable in bankruptcy, five criteria must be met:

  1. The due date for filing a tax return is at least three years ago – the debt has to be from a tax return that was due at least three years before the bankruptcy is filed.
  2. The tax return was filed at least two years ago – the tax debt has to be from a filing that happened at least two years before the bankruptcy is filed.
  3. The tax assessment has not been in the last 240 days- the debt has to be assessed by the IRS at least 240 days before the bankruptcy is filed
  4. The tax return was not fraudulent- the tax return cannot be fraudulent or frivolous.
  5. The taxpayer is not guilty of tax evasion – the taxpayer cannot be guilty of intentionally evading any tax laws

Analyzing your bankruptcy tax debt is very tricky and should be correctly determined from a bankruptcy expert. Call the Doan Law Firm for a free consultation.


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