If you are filing bankruptcy with the help of your Bankruptcy Lawyer Orange County, you are naturally hoping to have some part of your debts forgiven or discharged. A major debt to consider is the taxes you owe – will bankruptcy discharge these?
You will be happy to learn that tax debt can indeed be discharged, whether your case falls under Chapter 7 or 13 of the federal Bankruptcy Code. This does not happen automatically, though: there is a very specific set of requirements that needs to be met, and you ought to familiarize yourself with them before filing.
Firstly, the only taxes that can be wiped out under bankruptcy are income taxes. You will still have to pay anything else, such as payroll taxes and fraud penalties.
Since fraud has been brought up, it has to be said that bankruptcy won’t help you if you’ve been found guilty of intentional tax fraud. This covers a number of situations, from filing fraudulent tax returns to using a false Social Security number to evade heavy taxes.
The tax debts in question must be three years old by the time you file for bankruptcy. This time period includes any extensions that your state allows. Check with your Los Angeles Bankruptcy Attorney to see if this applies in your case: if you don’t meet this requirement yet but don’t have to wait too long for the three years to be up (for example, a matter of months), you might want to delay filing bankruptcy to avoid having to pay off a debt you can’t afford. The tax return for the debt you want to be written off must also have been filed with the IRS for at least two years prior to your filing for bankruptcy.
There is also something that is known as the 240-day rule. This means that the IRS must have made an assessment of your tax liabilities at least 240 days prior to bankruptcy is filed by you and/or your attorney. This assessment may either arise from a self-reported amount or that resulting from and IRS-initiated audit.
Since taxes are only one of the issues that must be taken into account when filing bankruptcy, you should consult your Corona Bankruptcy Lawyer before making any decisions. For example, delaying while you wait for the 3 years or 240 days to be up before filing might not be worth the trouble you’ll get into with your other creditors.