Taxes and Bankruptcy
It’s that time of year again, and our thoughts turn to taxes. But what if you are considering or are involved in bankruptcy?
You can discharge (wipe out) debts for federal income taxes in Chapter 7 bankruptcy only if all of the following conditions are true: The taxes are income taxes. Taxes other than income, such as payroll taxes or fraud penalties, can never be eliminated in bankruptcy. You did not commit fraud or willful evasion.
If you owe past-due federal taxes that you cannot pay, bankruptcy may be an option. Other options include an IRS payment plan or an offer in compromise.
From the government website: If you are a person that has filed bankruptcy, a debtor’s attorney, or a U.S. Trustee with questions about an open bankruptcy you may contact the IRS’ Centralized Insolvency Operations Unit, Monday through Friday, 7:00 a.m. to 10:00 p.m., EST, at 1-800-973-0424.
For individuals, the most common type of bankruptcy is Chapter 13. Before you consider filing a Chapter 13 here are some things you should know:
- You must file all required tax returns for tax periods ending within four years of your bankruptcy filing.
- During your bankruptcy, you must continue to file, or get an extension of time to file, all required returns.
- During your bankruptcy case, you should pay all current taxes as they come due.
- Failure to file returns and/or pay current taxes during your bankruptcy may result in your case being dismissed.
Partnerships and corporations file bankruptcy under Chapter 7 or Chapter 11 of the bankruptcy code. Individuals may also file under Chapter 7 or Chapter 11. For additional tax information on bankruptcy, refer to Publication 908, Bankruptcy Tax Guide and Publication 5082, What You Should Know About Chapter 13 Bankruptcy and Delinquent Returns (PDF).
Other types of bankruptcy include Chapters 9, 12, and 15. Cases under these chapters of the bankruptcy code involve municipalities, family farmers and fishermen, and international cases.
Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida. For more information, go to our web site www.BankruptcyforTampa.com or call 727-335-7151.