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Using Bankruptcy for Tax Relief


When people think of filing bankruptcy, they think of eliminating or wiping away all of the debts they’ve incurred through the years. However, wiping debts away is not as simple as it seems and truthfully, bankruptcy does not eliminate all debts. Many commercials offer to erase tax debts in bankruptcy. Our tax and bankruptcy attorneys will discuss how to use bankruptcy for tax debt relief.

Bankruptcy Should Not Be Pursued Without an Attorney

No matter the type of bankruptcy being filed, bankruptcy should not be filed without a knowledgeable West Palm Beach attorney. Because of the complexity of the laws and the process involved, an attorney can help make the process easier and smoother.

How to Discharge a Tax Debt

Tax debts can be wiped out in Chapter 7 bankruptcy if:

  • The tax debt is 3 years or older
  • The taxes are income taxes, not payroll taxes
  • There’s no tax fraud or tax evasion
  • The tax return filed at least 2 years ago
  • The tax assessment is 240 days old or more

Under 11 U.S.C. Section 523 and 11 U.S.C. Section 507, income tax debt cannot be discharged in personal bankruptcy unless certain requirements are met. And, tax debts from unfiled taxes are not eligible to be discharged in bankruptcy. The debtor would still be responsible for those debts.

Tax Filings with the IRS Matter

A filer must prove that the previous four years of returns have been filed with the IRS before the court will grant bankruptcy. The most recent copy of the tax return must be given to the bankruptcy court.

If Bankruptcy is not an Option, Try to Settle with the IRS

Because the IRS is willing to work with those who cannot pay at tax time, an offer in compromise is an option. The IRS may be willing to accept a repayment plan or even allow debtors to pay less than what is owed.

Although this may be an option, it is important to note that nothing is guaranteed with the IRS. The IRS does not have to accept an offer in compromise. If they do accept the compromise, the decision will be based on several factors such as the financial situation or status of a debtor. If the debtor can show a financial hardship, he or she has a better chance of getting the IRS to work with their offer and possibly obtain an installment or some sort of payment agreement.

Do You Have Questions about the Possibility of Using Bankruptcy for Tax Relief? Call Our West Palm Beach Taxes & Bankruptcy Attorneys Today.

If you or someone you know is looking to file bankruptcy to relieve tax debts incurred over time, please contact a West Palm Beach taxes and bankruptcy attorney at Kelley Kaplan & Eller at 561-264-6850 for a consultation. Tax debt and bankruptcy can be complicated and shouldn’t be pursued on your own. With our attorneys by your side you may be able to have tax debt discharged through the bankruptcy process. Give us a call and discover how we can help you today.


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