How to bankrupt Income Taxes
Bankruptcy can discharge income tax debt. Bankruptcy will not normally remove an income tax lien however most IRS tax liens dissolve 10 years after the return is properly filed. Income taxes can be discharged 3 years after the tax became due, and the return is properly filed. If an extension was properly requested the income tax return probably did not become due until October 15th of that year even if it was filed earlier. The IRS tax debt would not become dischargable until 3 years after October 15th even if it was filed earlier than October 15th.
Other items can delay the date a tax becomes dischargeable such as other bankruptcy filings, assessments, offers in compromise and due process hearings. If you file as a Chapter 13 Bankruptcy you will normally continue to lose your income tax refunds until the plan is paid.
A bankruptcy can discharge state and local income tax debts. Timing is a very important issue in discharging a tax debt and there are some other basic steps that must be followed. This is how discharge income taxes:
- Your tax returns must have been due three years or more before the bankruptcy petition is filed;
- Your tax returns have to have been filed more than two years before the petition;
- The tax you owe must have been assessed against you by the government for at least 240 days before the case is filed;
- Your tax returns must have been truthful and not fraudulent; and,
- You must not have been intentionally attempting to evade or defeat the tax when you failed to pay.
When an IRS lien attaches it effects any assets you own at the time it is filed and anything you later acquire until the lien is terminated. If the returns are not properly filed or are filed fraudulently the clock never runs on the statute of limitations for the lien. The failure to file a return and to keep records are a basis for never having the debt discharged in bankruptcy and owing the debt forever. This is why it is imperative that you use a bankruptcy attorney that is able to pull your tax transcript and analyze when the bankruptcy should be filed. After 10 years the tax lien expires and it is no longer effective. Your personal responsibility can be discharged if you properly file a return and wait the correct amount of time to file income tax bankruptcy. However for the lien to be removed it often only requires waiting the 10 years and the IRS very rarely forecloses on real property.
Nick C Thompson Louisville Kentucky Chapter 7 13 Bankruptcy Attorney
