With the dawn of a new year, celebrations quickly recede into the past and everyday concerns for the present and future rise again. Part of that is inevitable worry about tax time in April. For some Pittsburghers, this is based on being behind in tax payments. Those who are confronted with IRS tax debt could think about the potential penalties they will face if they do not pay, but are also thinking about not having the funds to clear that debt.
Often, people will avoid the thought of bankruptcy thinking negatively about it without truly understanding how it can benefit them in their situation. It is in these cases where a legal professional experienced in bankruptcy cases can help. It is possible to discharge tax debts by filing for bankruptcy. This can be done with Chapter 7 or Chapter 13 filings. It is vital to remember that there are different criteria with Chapter 7 and Chapter 13 and IRS tax debt. Debtors should also remember that certain debts such as secured liabilities and tax liens cannot be discharged.
With Chapter 7, the debt can be discharged in the following circumstances: if there was no tax evasion or tax fraud; the taxes are based on income; it is at least a three-year old tax debt; there were tax returns filed for a minimum of two years prior to filing; and the IRS has yet to assess the tax debt or an assessment was done a minimum of 240 days prior to filing. For Chapter 13, there can be a discharge or limit repayment if the tax debt is nonpriority. The criteria for the Chapter 7 are the same for nonpriority debts. Therefore, the amount that must be repaid will be based on how much income is left over after living expenses were deducted. Many debtors will not need to pay the full amount.
When confronted with IRS tax debt, many people will not realize their options to clear the debt via bankruptcy. Chapter 7 and Chapter 13 provide benefits for those who are facing these problems. Discussing the case with a bankruptcy lawyer can help with getting out from under IRS tax debt and getting piece of mind financially and personally.