Discharging Tax Debt Through Bankruptcy

Filing for bankruptcy can be an effective way to get out of debt and get started rebuilding your financial life. While bankruptcy can provide quicker relief than other options such as debt settlement or credit counseling, some debts are ineligible for discharge. When dealing with tax debt, it can be difficult to get a discharge for it through bankruptcy. While it is possible, you’ll have to make sure that you meet certain standards. Otherwise, your tax debts may remain even after you file for bankruptcy.

Tax debts are subject to specific rules that must be met before they can be discharged in any kind of bankruptcy. The tax debt in question must be at least 36 months old in order to be eligible. When you need to discharge a tax debt, the return associated with that debt must have been filed at least 24 months ago as well. In addition to filing the return more than 24 months ago, you also have to make sure that the tax assessment is at least eight months old. The tax return that you file also has to be legitimate and cannot be fraudulent. You also cannot simply file for bankruptcy so that you can get out of paying taxes. This is considered tax evasion and is against the law.

If you want to qualify for bankruptcy discharge with your tax debt, you also have to prove that you have filed your last previous four tax returns with the Internal Revenue Service. Without having proof of filing those returns, you will not be eligible to have the debt discharged through the bankruptcy process.

While it is possible to get your tax debt discharged in bankruptcy, it is not very likely. In order to get part of your tax debt discharged, you have to prove that it is at least three years old. In most cases, the Internal Revenue Service will start contacting you almost immediately after your tax debt is not paid. The chances of you being able to hold out for more than three years without having anything done by the IRS are not good. The Internal Revenue Service has many ways that they can try to get you to pay your tax debt. For example, the IRS can file a tax lien on your property and make it difficult to sell any of your property without paying back the debt. In some cases, the IRS also has the right to seize your property such as your house, your vehicle, jewelry, securities and money from your bank account. If you do not pay the debt in the appropriate amount of time, the IRS will start trying to collect this money from you.

If you are having trouble repaying your tax debt, you may want to explore some other options besides trying to wait out the three year period for filing bankruptcy. For example, you could try to set up an installment agreement with the IRS or use an offer in compromise to settle your tax debt for less than you owe. The IRS will evaluate your proposal and decide if it is worth accepting.

IRS Tax Debt – Resolving the IRS Dues that you Owe

If you owe money to the IRS on taxes, you should find out some way to pay off the due amount. Otherwise, things can get complicated. There are various ways in which you can try resolving your IRS tax debt. You can try to do it on your own or else, you can also try to get help from the debt settlement companies to resolve the tax debt problem.

Resolving IRS tax debt:

Resolving your tax debt on your own is not much of a problem because there are various ways in which you can pay off your IRS debts. This is because the IRS encourages the tax payers to pay at least what is possible for them. The different types of IRS pay off agreements are:

1. The installment agreement – In installment agreement you can make a payment each month (installment) on the back taxes. This helps you to pay off the taxes that you owe to the IRS. Installment agreement types–

* Non-streamlined
* Partial payment
* Guaranteed
* Streamlined

2. Offer in Compromise – In OIC or offer in compromise you are not required to pay the full tax amount that you owe to the IRS. The IRS allows you what the debt settlement companies do for you in case of simple debts. There are some terms and conditions which you will have to abide by while making OIC payments, otherwise the IRS can revoke the OIC.

3. Currently not collectible plan – In Currently not collectible plan you won’t have to pay your back taxes at least for the time being. This is one of the best debt relief options for you, if you are now without enough cash to handle all of your expenses. You will have to pay off the debt at a later date.

The thing is that you will have to try and pay off your taxes. If you are facing problems you will have to talk about that to the IRS and they will offer you any of the above agreements as per your financial condition. However, if they are able to find out that you intentionally trying not to pay the tax, you may get seriously penalized.