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Bankruptcy Discharge Analysis

Generally, bankruptcy is a last resort process that affords relief to taxpayers who are unable to resolve their liability through any other method. However, sometimes it is the right answer.

Certain tax liabilities can be discharged if all the criteria are met for a particular period.

Generally, income taxes are available to be discharged in bankruptcy if they meet certain criteria. In order for an income tax liability to be eligible for discharge in a bankruptcy, it must meet each of the following rules:

• The tax is for a year for which a tax return was due more than 3 years prior to the bankruptcy filing;
• The tax is from a return that was filed more than two years prior to the bankruptcy filing; and
• The tax liability was assessed more than 240 days prior to filing of the bankruptcy petition.

Trust fund portion of payroll tax liabilities are not dischargeable even if the above rules are met.

Income taxes can be non-dischargeable for a variety of other reasons even if the three rules above are met, including equity in assets, taxes secured by existing assets, taxes being created by a fraudulent event, etc. Issues outside of those defined above are the responsibility of a bankruptcy attorney to determine.

Our office can determine if a bankruptcy may be a good option compared to all those other options available and we can write a report outlining the date we'd recommend waiting for the petition to be filed if in fact bankruptcy is the best option.

DON'T FILE A BANKRUPTCY TO RESOLVE TAXES WITHOUT CONSULTING WITH US FIRST! NOT ONLY CAN WE HELP YOU TARGET THE RIGHT DATE TO FILE, BUT WE MAY HAVE A BETTER METHOD OF RESOLVING THE TAXES THAT COULD ALLOW YOU TO AVOID BANKRUPTCY ALTOGETHER!

If you are considering a bankruptcy to resolve your taxes, contact our office so we can determine if that's your best option available.