Tuesday, November 17, 2009

Eliminate Taxes in Bankruptcy?

There are a lot of complex rules that allow for discharging of taxes owed to the IRS here are some of them:

  • Bankruptcy 3 years after tax return due date or
  • 2 years after late return is filed (whichever is longer)
  • Over 240 days after audit is final:
  • Any appeal extends time
  • Offer and Compromise extends time
  • Must have filed return (no substitute returns)
  • Can only bankrupt against income and non-trust fund portion of employment tax.
  • Employee portions & Sales tax can not be discharged.

Asset (ch. 13) vs. No-Asset (ch. 7) filings

Chapter 7 (No-Asset)

  • Not enough equity & cash flow to pay debt.
  • Limited to $800 cash, $1K Auto & $5K Home

Chapter 13 (Assets and/or Cash)

  • Assets not lost but debt is reorganized and Interest lowered. IRS stops interest and penalties.
  • Limited to 60 months pay back on "excess" cash flow or assets.
Seek the advice of a lawyer for any decisions are made.

1 comment:

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