Get Rid of Tax Debts through Bankruptcy Filing
It is a common misunderstanding that bankruptcy can not release tax debts. It is possible, but there are many rules governing discharge. Debt in income tax could, depending on how old and other criteria, be eligible for release according to the Bankruptcy Code.
Bankruptcy is segregated in various chapters – and the type of debt that you have can affect the chapter that you have to file and how you will file your bankruptcy in Oklahoma or other states in the U.S. In certain cases, you may be required by the Bankruptcy Court to sell your assets to pay part of your debt. Alternatively, the court can make a payment arrangement so that you can pay creditors off the remaining debt balance for several years before you can withdraw.
It is a legal process which helps individuals and firms who can not pay their debts. However, there are various types of debt - related to bankruptcy. The chapter of the bankruptcy code which sets the rules refers to these different types of bankruptcy.
Can tax debt in bankruptcy be discharged?
Although some debts can not be discharged rarely, the rules for other types of debt – such as tax debt – do not go so far.
Until at least three years after it has been due, taxes cannot be discharged in bankruptcy. For instance, 2015 taxes are due in April 2016, which means that they can not be discharged until April 2019.
A tax return for the fee you owe must be filed, and you must have filed it for discharge at least two years before. If then, you had to wait until 2021 before the 2015 tax could be discharged. Moreover, it may be impossible to discharge the tax debt if you never filed a return.
Taxes must be assessed within 240 days before the filing of your bankruptcy. Therefore, you would need to wait until 240 days following the audit if you were audited and your taxes reassessed after tax day.
Five Tax Discharge Rules Applied
Tax liabilities are linked with a specific tax return and tax year. The bankruptcy law sets particular criteria for the length of tax debt and a couple of further regulations before it can be discharged. If the income tax liability meets all five of the rules, the tax liability is dischargeable:
At least three years ago was the due date for filing the appropriate tax return.
At least two years ago, the tax return was submitted.
At least 240 days old is the tax assessment.
No fraudulent tax return.
The taxpayer shall not be responsible for tax evasion.
To determine whether the unpaid balance of that year is dischargeable, apply these criteria to the annual tax debt. Some of your liabilities may be while others may not.
Have you bought the idea of filing bankruptcy to discharge your tax debts? Consider filing it in 2019 with the consultation of bankruptcy lawyers at Chris Mudd and associates. This will allow you to include income taxes from 2018 into your plan of payment. That will give you important advantages:
You will save money on your 2018 tax payment.
It provides you with precious flexibility.
Stop tax receipts and a 2018 tax allowance
It's nice to be careful not to get hit with a tax lien. For plenty of reasons, tax liens are dangerous. They risk your valuable assets, as leverage for the IRS / state. Bankruptcy prevents tax liens and provides you with the means to pay tax on a relatively flexible budget.
It is a good idea to have lawyers' advice when deciding if filing for bankruptcy could help you eliminate or reduce your taxes due because it is complicated to comprehend the rules for bankruptcy and taxes. Come to us at Chris Mudd and Associates for all information related to bankruptcy in Oklahoma including how to file it, the criteria and the restrictions.
** Disclaimer: This blog post does not constitute legal advice, nor does it create a client-attorney relationship.