Can Irs Back Taxes Be Removed Through Bankruptcy?
Monday, February 8th, 2010 at
11:06 pm
I have tax debt, some of which is more than 7 years old, and I heard that they can be removed by declaring bankruptcy. Is this true? If so, can I also file an Offer In Compromise for the newer tax debt?
Tagged with: back • Back Taxes • Bankruptcy • Declaring Bankruptcy • Irs Taxes • Offer In Compromise • Removed • TAX DEBT • Taxes • Through
Filed under: Irs Debt Help
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Ignore the posts that say taxes are not dischargable. The people don’t know what they are talking about.
With some minor exceptions, income taxes where you filed the original return that became due and owing over three years prior to filing bankruptcy–right now this means 2004 and prior will be discharged except as to exempt or abandoned assets. These taxes have to have been billed for at least 240 days so a fresh bill from an audit that dragged on for ages would survive. If you file a Chapter 13, you can propose a plan to pay the tax and interest but not penalties.
In all cases, make sure you consult a lawyer. This is not a do it yourself project.
The best thing you can do is to fix the problem that is causing you to owe each year thru estimated taxes or withholding. If you don’t you will never break this cycle and will always pay more than everyone else thru penalties and interest.
You can file bankruptcy for back taxes if they are old enough. As Wartz mentioned they have to be at least 3 years old. That is 3 years from the time you filed it not tax years, so a 2004 return filed in 2006 would not be old enough.
Nothing would then stop you from filing an OIC. But less than %20 are ever accepted. You have to remember that an OIC has to be a good deal for the government, not for you. Also you must pay the offer up front, and they can take 2 years to decide, and if they reject you offer they keep your money and apply it to your debt.
If you truly can’t afford to pay your taxes you should find out if you qualify for a partial payment installment agreement. This is where IRS takes less than the full amount you owe and bases you payment on what you can afford. They will require you to make estimated taxes and will allow for living expenses, but take the rest of your income.
With a problem like yours there is no easy answer and life will be tough for a few years. Be cautious about the late night TV commercials, they are rip offs. If you decide that an OIC is the best choice for you make sure you hire a local CPA or Enrolled Agent. With a problem like yours you need face to face service, not telephone service. Good luck
Wartz’s answer is good. I’ll add that there are certain taxes that cannot be discharged, apart from those within the time frame he mentioned. These include taxes owed due to the IRS filing a “substitute return” that you did not agree to as well as trust fund penalties.
Under some circumstances, old tax debt can be removed through bankrupcy, but it isn’t common.
As to newer debt, you can file an offer in compromise, but you do realize that most are turned down?
Nope.
And it’s getting next to impossible to file bankruptcy these days.
Assuming you filed timely returns and made no attempts to hinder collection, the old debts are probably dischargeable. But the Bankruptcy Code is full of pitfalls, so talk to a lawyer.
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NO!!!!! and i know first had, i filed bankruptcy before the new law went into effect and i still owe the corupted IRS.
No. Nothing is certain but death and taxes. They’ll get theirs sooner or later.
No, you will have to pay it back until death. Even if you dead they will get it out of any property that you have.
Don’t think so….But check with a lawyer.
No they can not…sorry