Can Bankruptcy Help With Your IRS Debt? Let Us Guide You
Tax Debt Bankruptcy: Can You Discharge IRS Debt Through Bankruptcy?
If you’re overwhelmed by tax debt, bankruptcy might offer a way to reduce or even eliminate what you owe to the IRS. While not all tax debts are dischargeable through bankruptcy, certain situations can allow taxpayers to have some or all of their tax liabilities forgiven. At Cheshier Tax Resolution, we help you understand whether bankruptcy is a viable option for your specific tax situation and guide you through the process.
What is Tax Debt Bankruptcy?
Tax Debt Bankruptcy refers to the potential discharge of tax debts through bankruptcy filings. Depending on the type of bankruptcy (usually Chapter 7 or Chapter 13), you may be able to have some or all of your eligible tax debt wiped away. However, strict rules and qualifications apply, and not all tax debts are eligible for discharge.
Types of Bankruptcy:
- Chapter 7 Bankruptcy: Known as a “liquidation bankruptcy,” Chapter 7 allows eligible debts, including some tax debts, to be discharged. You may need to sell certain assets to repay creditors.
- Chapter 13 Bankruptcy: Also called a “reorganization bankruptcy,” Chapter 13 allows you to keep your assets but requires you to pay back your debt through a structured payment plan, typically over 3 to 5 years. Some tax debts may be included in the payment plan.
What Tax Debts Can Be Discharged?
Only certain tax debts are eligible for discharge through bankruptcy. To qualify, you generally must meet these conditions:
- Income Taxes Only: Bankruptcy can only discharge personal or business income taxes, not other types of taxes like payroll taxes or fraud penalties.
- The Debt is at Least 3 Years Old: The tax debt must stem from a tax return that was due at least three years prior to filing for bankruptcy.
- You Filed the Tax Return: The tax return related to the debt must have been filed at least two years before filing for bankruptcy.
- The Tax Assessment is 240 Days Old: The IRS must have assessed the tax debt at least 240 days before you file for bankruptcy.
- No Fraud or Willful Evasion: You must not have committed tax fraud or intentionally evaded paying taxes.
If your tax debts meet these conditions, you may be eligible to have them discharged through bankruptcy. However, taxes tied to unfiled returns, payroll taxes, and fraud penalties cannot be eliminated through bankruptcy.
How Cheshier Tax Resolution Can Help.
Bankruptcy is a complex process, and it’s critical to understand if your tax debts can be included in a bankruptcy filing. Our team at Cheshier Tax Resolution will:
- Evaluate Your Eligibility: We review your financial situation and tax history to determine whether your tax debts can be discharged through bankruptcy.
- Guide You Through the Process: If bankruptcy is the right option, we work closely with you and your legal team to ensure that all the necessary conditions are met for discharging your tax debt.
- Alternative Options: If bankruptcy isn’t a viable solution, we can explore other IRS tax relief options, such as Offer in Compromise, Installment Agreements, or Penalty Abatement, to help you resolve your tax debt.
Is Bankruptcy Right for You?
While bankruptcy can be a powerful tool to eliminate tax debt, it’s not the best solution for everyone. If your debts don’t meet the specific IRS criteria for discharge, or if bankruptcy would result in significant asset liquidation, it may not be the right choice. That’s why it’s important to speak with experts who can assess your situation and guide you toward the best solution.
Take the First Step Toward Financial Freedom
If you’re struggling with tax debt and considering bankruptcy as an option, let Cheshier Tax Resolution help you navigate the process. We’ll evaluate your case, explore your options, and ensure you make the best decision for your financial future.
Call us at 469-647-9950 or fill out our online form to schedule a free consultation today.