Taxes and Bankruptcy

Many people come to us when they receive a collection letter from the IRS and say something like, “I can’t pay all my bills if I have to pay the IRS, what do I do?”  The answer lies in a little known attribute of the Bankruptcy Code (known to Bankruptcy Lawyers, rarely known to others) which provides for discharge of certain debts.

The statutes governing the issue of whether an IRS bill can be discharged are really complicated, but the general rules making taxes completely NON-dischargeable are straightforward.  So, here is a brief list, if anything on this list is true, your tax obligation is NOT DISCHARGEABLE.

  1. You didn’t file a tax return for the year in question at all.
  2. You didn’t file a tax return on time (with extensions) AND you live in the Fifth Circuit.
  3. 2 years have not passed since you actually filed the tax return in question.
  4. 3 years have not passed since the tax return was first due.
  5. Your taxes are for withholding from employees.

More detailed analysis is required in any tax liability and only a knowledgeable Bankruptcy Attorney can perform that analysis.  In general, if you owe income taxes for a tax year that is older than 3 years it is worthwhile seeing if the taxes can be discharged in a Bankruptcy Proceeding.

This article is written by an attorney at Wyatt & Mirabella, 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.