Bankruptcy and Taxes
For many individuals unpaid taxes are a source of distress. It can be the deciding factor in filing for bankruptcy. Recently, there were some changes made to bankruptcy laws regarding taxes eligibility. It is a common misunderstanding that bankruptcy will not discharge any tax debts. While addressing tax liability is a complex matter which should be left to a skilled
bankruptcy lawyer, the Bankruptcy Code does in fact offer relief for those burdened by undue income tax. Whether or not you are eligible for tax relief will depend on a number of factors including what type of tax liability, the status of those particular taxes, and which chapter of bankruptcy you choose to move forward with.
About Bankruptcy Filings and Tax Debt
Individuals may be able to discharge (no longer owe) certain tax related debts through bankruptcy. Some income tax is subject to discharge. Bankruptcy is not a viable option for tax liabilities related to payroll tax. This is also true for any excise tax (taxes paid on certain purchases such as sales tax and gasoline tax). Chapter 7 bankruptcy may be able to help you by eliminating all income taxes owed except the following examples:
- Taxes which were due three years prior to the filing.
- Taxes assessed within 240 days before the bankruptcy filing.
- Taxes which have not yet been assessed.
- Taxes which were filed late and filed within the two years prior to the bankruptcy filing.
- Taxes of an individual who sought to commit fraud or evade taxes.
It is important to go over the above points in more detail with an attorney so that you fully understand the effects of your bankruptcy filing. Speak with one of our attorneys at Bizar & Doyle to answer any questions you may have regarding taxes and bankruptcy filing.
Contact a Bankruptcy Attorney
today to find out more about how bankruptcy can affect your taxes.
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