Will Bankruptcy Get Rid of My Tax Debt?

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By: Bill Henry
PublishedJun 5, 2020
2 minute read

You have a number of options if you’re trying to get out from under tax debt. Bankruptcy may be one of them.

In this video, attorney Elizabeth Domenico discusses how you may be able to get rid of tax debt through bankruptcy.

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Some people are facing a large amount of tax debt and are not sure what their options are.

Can Bankruptcy Get Rid of Your Tax Debt?

In terms of bankruptcy, there are some remedies that can be useful to either eliminate or reorganize tax debt.

If You Filed on Time

On the personal tax debt side, 1040 or 104 taxes, bankruptcy can discharge some tax debt. As long as they were timely filed and the tax period is older than three years old, and you filed you returns more than two years from the date of a bankruptcy, subject to any assessments that they may have given, you can discharge those types of tax debts.

If You Did Not File on Time

If you didn’t file the tax returns timely or there is a substitute return filed on your behalf or if the taxes occurred within the last three taxing periods, those are gonna be considered priority debts and your not gonna be able to discharge those in a bankruptcy.

Your Option if You Were Not Timely

However, there are some options for repayment of past due tax debt in bankruptcy. We have a chapter, called chapter 13 whereby, you can reorganize tax debt over a period of up to five years.

What this allows you to do is get on a maybe more manageable payment plan than the IRS might be offering, and stop the interest and penalties from accruing to allow you to get that on a payment plan that’s more affordable monthly.

Past Due Payroll Taxes?

With regards to payroll taxes, 940 and 941 trust taxes, unfortunately, bankruptcy in so far as you might have a personal obligation on those, isn’t gonna be able to discharge those in most instances.

But again, if you’re at risk of having liens placed on your property or wage garnishments, levies, and they’re not willing to work with you, you can use a bankruptcy to delay enforcement of some of those debts, and again, possibly reorganize those as well.

If you have questions or concerns about tax debt you can call our office, we can discuss bankruptcy options, we also have a tax attorney who can take a look at your situation to see if there are other, any non-bankruptcy options that might be available to you.

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