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Will I Owe Taxes after Bankruptcy?


A lot of consumers assume that they can relieve their tax obligations by filing for bankruptcy. After all, you can discharge your other debts, and taxes are a heavy burden on your financial situation. But determining whether or not you will owe taxes post-bankruptcy isn’t as easy as “yes” or “no”. This all depends on the type of bankruptcy you file and the type of tax obligation you’re trying to discharge.

What Tax Debts Can You Discharge with Bankruptcy?

If you file Chapter 7 bankruptcy, then you may qualify for a tax discharge as long as you meet certain criteria. This will only apply to your federal income tax bill. To qualify, your taxes must:

• Be for income (not business);

• Have been calculated after filing a tax return (not from an audit);

• The tax liability must be three years or older;

• The tax due must have been assessed 240 days prior to filing for bankruptcy;

• You didn’t commit any tax fraud or evasion, which led to the tax balance due.

What Tax Debts Cannot be Discharged?

While there is a way to discharge some tax obligations, there are tax debts that are not discharged in Chapter 7, these include:

• Federal tax liens;

• Penalties and interest from tax debt;

• Debt associated with unfiled tax returns;

• Trust fund taxes or payroll taxes due.

Even if your tax debt is discharged, you are required to submit copies of your last year tax return (state and federal) while filing for bankruptcy. If you are receiving a refund on your next year’s return that refund will be send to the bankruptcy court trustee who will then decide how to apply that refund amount. Failure to follow any tax-related rules during a bankruptcy could result in your case being dismissed, which means you will not only owe your tax debt, but you could be liable for all debts.

Speak to a South Florida Bankruptcy Attorney First

The laws regarding bankruptcy are highly complex. There are a lot of forms to file and when you are trying to discharge tax debt, you must be extra cautious. The attorneys at the Law Office of Kelley Kaplan & Eller can help you with your tax obligations. Even if we cannot have your debts discharged, we may help you come to a payment amount that is agreeable with the IRS in Chapter 13 bankruptcy.

Call South Florida Bankruptcy Attorney today for a no obligation consultation at 561-264-6850.

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