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Bankruptcy - How to Eliminate Tax Debts

by spadlv (writer), , July 26, 2015

Credit: UtBankruptcyLawyers
How to Eliminate Tax Debts

Many people believe that tax debts can be eliminated by a successful declaration of bankruptcy. While this true, other taxes can never be wiped out by bankruptcy.

Besides, the clearance of taxes is not that simple. There is a tedious and lengthy process involved in a bid to prove your claims regarding inability to meet the tax obligations. For a chapter 7 bankruptcy, the law prohibits you to owe the tax authorities until the end of the bankruptcy period. On the other hand, full repayments of taxes are mandatory in the case of chapter 13 bankruptcy.

For those that require a discharge of tax debts, they should consider pursuing chapter 7 bankruptcy as it is best suited for such. The terms are that your eligibility to the chapter 7 bankruptcy should be unquestionable, so does the qualification for your debts for discharge.

When can you wipe out the tax debts?

Under chapter 7 bankruptcy, it is possible to discharge all the tax debt if the following conditions hold true:

The taxes should be income related: it is possible to eliminate income taxes through bankruptcy. Others that include fraud penalty taxes or payroll will stick around until you do something about them.

You are cleared from fraudulent activities or intentional and willful tax evasion: Bankruptcy is helpless to a person who engages in cunning tricks to evade taxes. In fact, if such an act is detected, you can be slapped a lengthy jail term.

The debt should be three-year-old at least or more: For a tax debt less than three years old, bankruptcy wields no power.

Tax Return Filing: file for tax returns two years prior to filing for bankruptcy.

The ‘240-day' rule—you must Pass: The IRS must have a thorough assessment of your income tax at least 240 days earlier before you can file for a petition of your bankruptcy. However, you can be lucky enough to have the time limit extended especially if the IRS deems it fit to execute suspensions of tax collection activity due to the possible compromising offer. It can also be because of bankruptcy filing done in the past.

There you have it… do not evade taxes because sooner or later, the taxman catches up with everyone, even when you are declaring bankruptcy. As you have seen above, you will have to file your tax returns much earlier in advance before you can go to court to file for bankruptcy. However, it is important that you look for a bankruptcy attorney to make your position clear, know where you stand in regard to the IRS.



About the Writer

spadlv is a writer for BrooWaha. For more information, visit the writer's website.
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1 comments on Bankruptcy - How to Eliminate Tax Debts

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By beyondme on July 28, 2015 at 04:49 am

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