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Tax Analysis for Bankruptcy Discharge Eligibility

Bankruptcy is not usually the best option for resolving your tax debts. Filing a bankruptcy should generally be viewed is a last resort process if no better alternatives exist.

DON'T FILE A BANKRUPTCY TO RESOLVE TAXES WITHOUT CONSULTING WITH US FIRST! WE MAY HAVE A BETTER METHOD OF RESOLVING THE TAXES THAT COULD ALLOW YOU TO AVOID BANKRUPTCY ALTOGETHER!

There are some occasions when filing bankruptcy may be the right solution to your tax problem. This is usually when other types of substantial debt in addition to taxes are also involved.

Some tax liabilities could be eligible for discharge if certain criteria are met for each particular period. Generally, in order for an income tax liability to be eligible for discharge in a bankruptcy, it must meet each of the following rules:

  • The tax is for a year for which a tax return was due more than 3 years prior to the bankruptcy filing;
  • The tax is from a return that was filed more than two years prior to the bankruptcy filing; and
  • The tax liability was assessed more than 240 days prior to filing of the bankruptcy petition.

Trust fund portions of payroll tax liabilities are generally not dischargeable regardless if the above rules are met.

Income taxes can be non-dischargeable for a variety of other reasons even if the three rules above are met, including equity in assets, taxes secured by liens on existing assets, taxes being created by a fraudulent event, etc. Identifying obstacles outside of those defined above that may prevent discharge of tax debts are the responsibility of a bankruptcy attorney to determine prior to the filing of a petition and throughout the bankruptcy representation process.

If you are considering a bankruptcy to resolve your tax debts, please contact our office so that we can identify other alternatives and/or help you identify the tax discharge eligibility dates that you may want to wait for. In the event that bankruptcy does turn out to be your best alternative, we can get you into the hands of a competent bankruptcy attorney to represent you.

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