When to Consider Bankruptcy for Tax Debt Relief

Tax debt can be discharged through bankruptcy under certain circumstances. However, it's important to understand that not all tax debts can be discharged through bankruptcy. The rules regarding the discharge of tax debt in bankruptcy are complex and depend on several factors.

Because it is a quicker process and does not require debt repayment, Chapter 7 bankruptcy is probably the better option if you need to discharge tax debts. But not everyone has access to Chapter 7. Your tax debt must qualify for a Chapter 7 bankruptcy discharge, and you must be eligible for Chapter 7 bankruptcy.

In general, tax debts may be discharged through bankruptcy if the following criteria are met:

1. The tax debt is for income taxes only, and not for other types of taxes such as payroll taxes or fraud penalties.

2. The tax debt is at least three years old. This means that the tax return was due at least three years before the bankruptcy filing.

3. The tax return was filed at least two years before the bankruptcy filing.

4. The tax assessment is at least 240 days old. This means that the IRS has assessed the tax debt at least 240 days before the bankruptcy filing.

5. The taxpayer did not commit tax fraud or willful tax evasion.

If these criteria are met, the tax debt may be eligible for discharge through bankruptcy. If you do qualify, you will be out of luck if a tax lien has been placed on your property as a tax lien is not dischargeable. It's important to consult with a bankruptcy attorney to determine the best course of action, as there may be other factors that could affect the dischargeability of tax debt.

The focus of our practice is helping individuals and businesses resolve their IRS tax problems in the Las Vegas, Nevada, St. George, Utah areas, and elsewhere. If you or someone you know is dealing with IRS problems, contact me at 702-469-9426 or candy@numbercruncherllc.tax.