In America, we do not have debtor’s prisons. We similarly do not imprison people who tell the government the truth but simply can’t afford to pay their income taxes. So, since very few people ever get a person with a badge and a gun at their door to collect taxes people can make the mistake of thinking that the problem will just go away. It doesn’t.
There are at least 4 different sets of statutes of limitations, the period within which it is still legal to enforce an obligation, that apply to debts to the IRS. There is no limitations period on the IRS collecting a debt incurred by fraud! Outside of that, you may find yourself working year after year to pay down a mortgage simply to find out that you are buying equity from your bank to hand over to the IRS at a closing of the sale of your house.
Depending on the nature of the debt, there are “sweet spots” to be had in regard to shedding the debt in bankruptcy. File too early and your debts may not get discharged, file too late and you may have enough equity that your debts are secured by collateral and need to be paid during a Bankruptcy case.
The moral to the story is this. If you get into trouble with taxes, do not poke your head in the sand. Seek out competent legal and accounting advice as soon as possible.
This article is written by an attorney at Attorney Donald Wyatt PC. Always consult an attorney before making any legal decisions. To make an appointment today for a free consultation, please click here to contact us.