Most people, and many bankruptcy practitioners, do
not know that certain tax debts CAN be discharged in
a bankruptcy. Most of those that cannot be discharged
on a given can be discharged if the debtor simply waits
a certain amount of time before filing. Worse, it seems
that most bankruptcy attorneys just assume the debtor
must and will file bankruptcy immediately and are never
given the option or advice to wait in order to discharge
some or all of the tax debts.
To determine whether tax
debts are dischargeable on a given date, each tax
year must be separately analyzed. Simply put, taxes
(and the related penalties and interest) can be discharged
if:
(i) the debt is for income taxes (not a civil
penalty for unpaid payroll taxes), and
(ii) the return
for that year was "due" (including extensions) at least
3 years ago, and
(iii) a return was "filed" more
than 2 years ago, and
(iv) the tax was "assessed" more
than 8 months ago, and
(v). there was no fraud involved
The above paragraph
cannot be taken by you as the rendering of legal
advice by me or my law firm. Rather, it is to give
you an idea of the type of tests that must be satisfied
to discharge a tax debt yet there are a number of issues
that may come up with this. They can include, but
are not limited to:
- Was an Offer in Compromise filed
by the taxpayer? If so, that can negatively extend
test (iv) above.
- Did you previously file a bankruptcy?
If so, that can negatively extend tests (ii)
through (iv).
- How many extensions were granted? Are
you sure?
- When did the extensions expire (if the
date landed on a Saturday, Sunday, or a legal holiday,
that changes things; similarly, your extension
request for 2004 may have been extended even longer
due to Hurricane Charlie)
- If you did not actually file
a form 1040, can some other action or event satisfy
this test?
As you can see, this important analysis
is not for the faint of heart which may explain
why most bankruptcy attorneys refuse to engage
in it. But we do! Of course, there is a separate charge
for this important task but well worth every
penny. We would need for you to sign
a Power
of Attorney for
us to be able to request and receive copies
of official "records of account" for each year.
We can then give you a legal opinion as to
which tax debts are dischargeable today,
and which will be dischargeable on a future date.
If the bulk of your tax problem cannot be resolved
through bankruptcy until some future date,
we usually recommend you hire us to keep
IRS at bay in the meantime, and postpone filing
your bankruptcy until you can best take advantage
of the tax-bankruptcy laws.
> back to Bankruptcy
Basics
