While filing bankruptcy can alleviate stress from overwhelming monetary issues, certain additional requirements come into play when individuals attempt to eliminate back taxes through bankruptcy. When a debtor files for bankruptcy protection, certain back tax obligations may be discharged. However, the criteria are somewhat stringent. The taxes must be income taxes, the debt must be at least three years old, and the tax return must have no falsified or fraudulent information. Plus, there must be a lack of proof of tax evasion, and the IRS must have assessed the debtor’s taxes at least 240 days before the bankruptcy filing. Furthermore, if the IRS has filed a tax lien on any property, bankruptcy will usually not extinguish the lien.
Different relief may be found through Chapter 13. If the back taxes are over three years old, there is a possibility that they can be eliminated regardless of which chapter of bankruptcy is filed. Chapter 13 offers the additional option of paying the back taxes over an extended period of time if they are not dischargeable. Ultimately, it will be up to the bankruptcy court to decide whether the back taxes can be discharged. Debtors should consult an attorney before filing for bankruptcy protection.
Paul Caston, Attorney at Law, is a debt relief agency as defined by the United States bankruptcy code. The office helps individuals file for relief under the bankruptcy code.