Bryan P. Keenan & Associates, P.C.
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Bryan P. Keenan

Can filing for bankruptcy help me with my IRS tax debt?

The Internal Revenue Service (IRS) can spark fear in a person just by sending a letter or making any type of contact about IRS tax debt. Pittsburgh residents who are dealing with this issue and are told they owe payments on their taxes will be worried about what the future holds. This is compounded if they are already having financial problems and cannot make their payments for credit cards, mortgages, automobiles and more. Fortunately, bankruptcy can help with tax debt.

The circumstances must be right for this to be done and it is not always possible, but when there are concerns about this problem, legal advice is essential. Generally, it is easier to discharge tax debt with a liquidation bankruptcy through Chapter 7.

It can also be done in Chapter 13, but that is part of a payment plan that is approved by the court. Key factors in whether the tax debt can be discharged include the tax itself, how old it is, if there were returns filed in the past and the bankruptcy chapter the debtor is using.

For those filing for Chapter 7, the tax debt can be discharged in the following situations: it is for income taxes alone; there were legitimate tax returns filed for two years before filing; the liability is a minimum of three years old; the debtor has been declared eligible based on the "240-day rule," which means that the debt was assessed for a minimum of that number of days prior to filing; and if the person did not commit tax evasion by changing his or her name, altering the name spelling, changing a Social Security Number and using other tactics; and the debtor did not commit tax fraud.

It is crucial to remember there is IRS tax debt that will not be discharged. That includes tax penalties for debt that could not be discharged; tax debts from unfiled returns; and trust fund or withholding taxes that were withheld from the person's pay. If there is no alternative to file for bankruptcy to clear IRS tax debt, there are other options that the person can consider like a compromise with the IRS or an installment plan.

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Bryan P. Keenan & Associates, P.C.

993 Greentree Road
Suite 101
Pittsburgh, PA 15220

Phone: 412-923-4941
Fax: 412-444-0158
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