How Income Tax Bankruptcy Can Help You
Filing Chapter 7 Bankruptcy to Eliminate Unpaid Taxes
Nov 4, 2009
Income tax bankruptcy, offer in compromise, installment agreements, partial payment installment agreements and not currently collectible are the five main ways of negotiating unpaid taxes. Whilst most people don't believe that federal income tax can be eliminated, it is possible under certain circumstances. However, when filing chapter 7 bankruptcy, it is necessary to comply with the criteria specified in the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act.
Income Tax Bankruptcy
Although one of the more complex aspects of the 2005 legislation, it is possible to clear unpaid federal income tax when a certain set of circumstances apply. In fact, income tax is the only form of taxation that can be written-off by filing. There is no assistance in relation to business, estate, gift, sales or fuel taxation. Non-dischargeable taxes will be construed as a priority debt and will need to be settled separately.
Eliminate Unpaid Taxes - Chapter 7 Bankruptcy
IRS tax debt settlement help will only be available when a very specific set of circumstances apply. One or more of the criteria below means that income tax bankruptcy will not be an option:
- When a return should have been filed within 3 years (plus extensions) of the date of filing.
- Taxation that was assessed by the IRS 240 days prior to the date of filing. This date is the one which shows on the IRS records.
- Any taxation that has yet to be assessed, yet remains assessable.
- Bankruptcy cannot be filed within 2 years for any tax return that was returned too late.
- Where any form of tax fraud has taken place in an attempt to evade payment.
Secured Income Tax - Where Income Tax Bankruptcy Isn't Possible
During the course of the IRS's normal collection activity, it is able to file a tax lien to protect its ability to recover any money owed. Once a secured on lien is filed on a property, it cannot be discharged through chapter 7 bankruptcy. This will be the case, even if the property would have been exempt under the current rules. The property cannot be sold or transferred to a friend or family member without payment being made to the Internal Revenue service.
Income tax bankruptcy will be of help to some people, but not everyone. There are a number of alternative sources of IRS tax debt settlement help for those who don't qualify under the current rules. It is important to seek guidance and assistance from a suitable qualified professional, such as a tax advisor or attorney, before filing chapter 7 bankruptcy.
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