Our Bankruptcy Lawyer Explains the Rules Regarding Tax Debt

Our Bankruptcy Lawyer Explains the Rules Regarding Tax Debt

Bankruptcy Lawyer

One of the persistent myths about Chapter 7 bankruptcy is that no debt owed to the Internal Revenue Service (IRS) is dischargeable. The truth is that you can include certain tax debts in your bankruptcy filing if they meet very specific conditions. If tax debts are part of your overwhelming financial problems, a bankruptcy lawyer at Kovacs Law Office can help you determine which ones are eligible for discharge through personal bankruptcy. It is important to note that tax assessed on income is the only type eligible for bankruptcy protection.

Filed at Least Two Years Ago and Due at Least Three Years Ago

IRS law prohibits you from filing bankruptcy on any tax debt incurred in the past 24 months. If challenged by the Taxing Authority, you must produce documentation indicating that you mailed a paper claim or filed electronically more than two years ago. This includes extensions. Additionally, your tax debt must have been due three years ago or longer.

Tax Assessment Requirements

In order to dismiss personal taxes in bankruptcy, the amount must have been assessed by the IRS and billed to you no less than 240 days prior to the date of your filing. The only exception to this time limit is if you were in the process of working out an offer in compromise with the IRS or you previously filed bankruptcy.

Willful or Fraudulent Tax Returns

The IRS will deny your request for the dismissal of your outstanding income tax debt if it determines that you intentionally filed a fraudulent return. If you are filing for bankruptcy with your spouse, the IRS must prove that both of you perpetuated the tax fraud before it can refuse to dismiss your debts.

Choose an Experienced Bankruptcy Attorney

Tax law is often complicated and can be even more so when dealing with bankruptcy. To discuss the possibility of eliminating your tax and other personal debts through Chapter 7 bankruptcy, contact us to schedule your initial consultation. Kovacs Law Office has helped thousands of Massachusetts residents get their financial lives back on track and we can do the same for you.