CAN IRS DEBT BE DISCHARGED

Both Chapter 7 and Chapter 13 bankruptcy can reduce or eliminate federal and state income taxes, property taxes, and taxes on gross receipts that are three or more years past due. A discharge releases the debtor from personal liability for certain dischargeable debts. Some taxes may be dischargeable. Whether a federal tax debt may be discharged depends on the unique facts and circumstances of each case.

Consult Texas Bankruptcy Attorney Patty Edwards to determine which tax debts may be discharged. Some of your tax debts may be removed completely; others may be negotiated so you can pay them off at a rate you can afford over a number of years either outside of bankruptcy or in a Chapter 13.

Whether you can discharge tax debt will depend on the type of tax, how old the tax debt is, if you filed a return and the type of bankruptcy. Federal income taxes in Chapter 7 are dischargeable if you meet all of the following conditions:

• The discharge is for income taxes. (Payroll taxes and penalties for fraud are not eligible for discharge.)
• You filed legitimate tax returns for the relevant tax years at least two years before filing for bankruptcy.
• The tax liability is at least three years old, meaning the tax debt is from a tax return that was originally due at least three years before filing for bankruptcy.
• You are eligible under the 240-day rule, meaning the IRS assessed the tax debt at least 240 days before you filed for bankruptcy. 
• You did not commit willful tax evasion. Possible evasive actions include changing your Social Security number, your name, or the spelling of your name; repeated failure to pay taxes; filing a blank or incomplete tax return; and withdrawing cash from a bank account and hiding it.
• You did not commit tax fraud, meaning the return contains no information that was intended to defraud the IRS.

Patty Edwards of Edwards Legal Office can explain all of these details to you in a free initial consultation in person or by phone. Attorney Edwards can provide bankruptcy services to help you get past due tax obligations discharged or reduced.

If you know that you owe back taxes, State or Federal, and have or have not entered into an agreement to repay take action today to:

• Make your payments easier through a Chapter 13
• Stop demand letters
• Stop wage garnishment
• Stop the seizure of your assets
• Cancel arrest warrants and recover your driver’s license if you owe taxes in Texas