The economy has taken multiple hits over recent years, with the average, hard-working American bearing the brunt of most of the problems. This has led to most individuals facing more financial debt than ever before. If this sounds familiar, it is time to recognize that you can turn around your financial situation.
Discharging, or eliminating, tax debts in bankruptcy is not as difficult as you may think. At The Turnaround Team in Scottsdale, Arizona, we work hard for our clients, helping them achieve debt relief and experience financial health. Let us help you.
Circumstances That Allow You to Fully Discharge Tax Debts
– Brian M. Blum, Managing Attorney
In general, you can only discharge income tax debts that are at least three years old, for which you filed the return at least 2 years prior to filing bankruptcy, and at least 240 days have passed since the IRS assessed the taxes to you. This is often referred to as the "3-2-240 rules."Get a Free Bankruptcy Consultation
Potential debts you may be able to eliminate in bankruptcy include:
- Income taxes
- Certain business taxes
- Non-trust-fund employment taxes
Chapter 7 bankruptcy offers you the ability to discharge certain tax debts, meaning those debts disappear completely. As long as you have not committed tax fraud or tax evasion, and your tax debts meet the specified criteria listed in the Bankruptcy Code, you will have a strong chance at success in eliminating your tax debt via Chapter 7.
Alternatives to Completely Eliminating Your Tax Debt
Sometimes Chapter 7 bankruptcy is not the best option. If that statement holds true in your situation, we will tell you that. We are frank and forthright with our clients—we want to ensure you head down the path to financial health. This means we have to create a plan that actually works for you.
In such situations, we will work with our clients to identify other opportunities to manage their tax debts. Those options include:
- Chapter 13 bankruptcy: You would be required to pay back the “priority” portion of your tax debts via the payment plan set up through Chapter 13 bankruptcy, and eliminate or reduce the remaining tax.
- IRS payment plan: The IRS has set stringent requirements you must meet before creating a monthly installment agreement. Under this agreement, you would make payments until you paid your debt in full.
- Offer in compromise: As long as you meet the IRS’s qualification requirements, you may be able to settle your tax debt for less than you owe. You can then pay via a lump sum or via monthly payments until you have paid the negotiated amount.
Discuss Your Tax Discharge Concerns in a Free Consultation
We offer a free, one-hour consultation to help you understand your best options for handling your tax debt concerns. We know you have enough financial worries right now—learning about your options need not add more stress to your plate.