Many people fall into debt and while it can be rough having to deal with financial struggles, there are ways that you can eliminate most of your debts. There are many forms of debt such as credit card, mortgage, lawsuit settlement, and taxes. While most of these debts can be forgiven through bankruptcy or through debt settlement with negotiation, there are certain requirements and restrictions when it comes to tax resolution. Due to these strict eligibility requirements, it is more difficult to discharge tax debts than other forms of debt. With Tax Debt Lawyers in Los Angeles from Chekian Law Office, you can see to it that every option is exhausted to seek resolution for your tax debts.
While erasing credit card debt may seem like an easy thing to do with a bankruptcy lawyer in Los Angeles, eliminating taxes may be more problematic. Income tax debts may seem like an insurmountable debt problem, but some taxes may be eligible for discharge under the Bankruptcy Code with a debt settlement lawyer in Los Angeles. Filing for insolvency with a Chapter 7 bankruptcy lawyer in Los Angeles provides for a full discharge of allowable debts, including taxes. Chapters 11 and Chapter 13 allow the filer to propose a payment plan to repay some tax debts, with the remainder of debts discharged without payment, depending on income, and has protection from foreclosure to prevent the sale of your possessions by your creditors. Not all tax debts are capable of being discharged in bankruptcy and unless a Chapter 7 is filed, getting legal assistance from a stop foreclosure attorney in Los Angeles will not be sufficient to prevent your properties from being relinquished.
5 Steps to discharging tax debt.
Bankruptcy is a powerful tool to eliminate some IRS debt problems. Generally speaking, taxes are eligible to be discharged in Chapter 7, Chapter 11 or Chapter 13 if:
- The bankruptcy was filed more than 3 years since the due date for filing the return.The tax debt must be related to a tax return that was due at least 3 years before the taxpayer filed for bankruptcy. The due date includes any extensions. For example, if a tax payer got an extension to file his 2008 tax return until October 15, 2009, and he filed on September 1, 2009, then the taxes for the 2008 year could be dischargeable so long as the bankruptcy is filed on October 16, 2012 or later;
- The tax return was filed at least 2 years prior to the bankruptcy.The tax debt must be related to a tax return that was filed at least 2 years before the bankruptcy filing. The time is measured from the time the taxpayer actually filed the return.
- The tax was assessed at least 240 days prior to filing bankruptcy.The IRS must assess the tax at least 240 days prior to the bankruptcy filing. The IRS assessment may arise from a self-reported balance due, an IRS final determination in an audit, or an IRS proposed assessment which has become final.
- The tax return was not fraudulent.The tax return cannot be fraudulent or frivolous.
- The taxpayer is not guilty of tax evasion.The taxpayer cannot be guilty of any intentional act of evading the tax laws.
The problem with unfiled tax returns.
Tax debts that arise from unfiled tax returns are not dischargeable. If you don’t file a tax return, you cannot wipe out those taxes in a bankruptcy. The IRS routinely assesses tax even where no return is filed, based on tax documents filed by employers and others reporting income which contain the social security number or tax identification number of the taxpayer. These tax debts cannot be discharged unless the taxpayer files a tax return for the year in question.
Other tax resolution issues in bankruptcy.
Debtors in a bankruptcy case are required to provide a copy of their latest filed tax return to the trustee prior to the Meeting of Creditors. If a creditor timely requests it, copies of the tax return must also be provided by the debtor to the creditor in a bankruptcy case.
Non bankruptcy alternatives to resolving tax debt: IRS Tax Settlement.
The two most common ways to resolve tax debt outside of bankruptcy are offers in compromise and installment agreements. Offers in compromise usually involve providing a detailed accounting of a taxpayer’s income, expenses, assets and debts to the government, with the goal of establishing economic hardship persuading the IRS to approve a lump sum payment which the IRS accepts as payment in full of the debt. Offers in compromise can be difficult and time consuming to get approved. Installment agreements, on the other hand, are usually much easier to get approved because the taxpayer typically pays an agreed monthly amount until the debt is paid in full, including all interest and penalties. Contact attorneys for bankruptcy from Chekian Law Office today!
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