Use Bankruptcy To Solve Tax Problems
By Eugene S. Melchionne, Connecticut Bankruptcy Attorney on Jan 29, 2007 in Benefits of Bankruptcy, Connecticut, Debts Not Dischargeable, Tax Issues
You know that saying “there’s nothing sure in this life but death and taxes”? You might think that it applies to bankruptcy as well. The bankruptcy code is full of sections giving preferential treatment to the tax collector.
However, many kinds of taxes are dischargeable in bankruptcy. And there are many different kinds of taxes. Let’s look at the most common kind of tax - income taxes.
In short, you must file your tax returns even if you owe taxes as a result. To paraphrase, it is better to have filed and owe than to not file at all.
Why? Because if you do file your returns and the IRS doesn’t succeed in collecting those taxes in three years, you might be able to discharge them.
Even if the taxes are not dischargeable, you might be able to use the bankruptcy process to negotiate a payment in full satisfaction, or if you are in Chapter 13, to set up a meaningful payment plan. Bankruptcy also can in certain instances, forestall enforcement efforts of the tax collector.
Cathy Moran | Jan 29, 2007 | Reply
Chapter 13 is a powerful tool in the hands of taxpayer who owes taxes, since it allows the discharge of taxes, for which returns were filed (either on time, or at least two years ago), that are at least three years old, and the payment of newer taxes without interest or penalty over the life of the plan. Sorta like pushing an offer in compromise down the IRS’s throat, without the expense of the OIC, and without the post acceptance conditions on future good behavior that come with the OIC.
Cathy Moran