The Truth About Discharging Taxes in Bankruptcy

I have to tell you that I hear this one all the time. In fact, it is possible to discharge some portion of federal, state, and local income taxes in your bankruptcy along with any penalties or interest that are attached. However, this is not a blanket statement.

THE NUMBERS THAT YOU NEED TO REMEMBER WITH RESPECT TO DISCHARGING TAXES IN BANKRUPTCY ARE 3, 2, AND 240. 

Here’s why.

Due, filed, and assessed are three very different things, and all factors involving your tax debt must be considered. If you are filing late returns, amended returns, are being audited, if a late filing, an amended return, or an audit result in changes to your initial assessment these are factors that could affect the above rules.

These rules hold true whether you are filing for a chapter 7, chapter 11, or chapter 13 bankruptcy. Of course, there are certain circumstances that can bump all of these numbers around. Everyone’s circumstances are different and no bankruptcy case is ever “uncomplicated.” Many find this out by not hiring an attorney to handle their bankruptcy, and instead of getting a fresh start, they will see their petition dismissed. It is very important that if you have a dispute with your taxes, that you let your attorney know this prior to filing. Attorneys, after all, are not mind readers. We need to know the facts going forward as much as anyone else.

If you are filing a bankruptcy and have significant tax debt, you need an attorney. Even without significant tax debt, we do not advise that you proceed into a bankruptcy filing without legal advice. There is simply no way around that. An attorney will tell you what is possible and what is not possible in your filing, and will level with you about whatever interest, penalties, and taxes you will still face. We are not here to sell you sunshine, but to present a realistic picture of your legal and financial standing. Call our Fort Lauderdale or West Palm Beachoffices to set up a free consultation and we can get you on the road to that fresh start.

Share
Published by
Chad Van Horn

Recent Posts

Celebrities Who Survived an AMEX Lawsuit (and You Can, Too)

The celebrities who survived an AMEX lawsuit did not come away unscathed, but it is possible to negotiate a settlement… Read More

4 days ago

Can Filing Chapter 13 Stop Foreclosure?

One of the questions I am most frequently asked when debtors are looking into bankruptcy, “Can filing Chapter 13 stop… Read More

2 weeks ago

The $99 million question: What happened to Adrian Peterson’s money?

Ninety-nine million dollars – and according to Deadspin.com – running back Adrian Peterson is as broke as a joke after… Read More

3 weeks ago

How We Are Different at Van Horn Law Group and Why It Matters

Theoretically, everyone has access to the justice system in order to seek protection and redress. Justice, however equal the law… Read More

4 weeks ago

Habla con nuestro equipo – Trabajando en Van Horn Law Group

¿Se pregunta cómo es trabajar en Van Horn Law Group? Estás de suerte. Aquí, vamos a echar un vistazo a… Read More

4 weeks ago

Excepciones a la regla: ¿Qué deuda no cubre la bancarrota?

Cuando se declara en bancarrota, una cosa que la mayoría de las personas espera es tener la mayor parte de… Read More

1 month ago