Can I file a Chapter 7 bankruptcy on income taxes?

One of the top questions I get from my bankruptcy clients is, “can I file for chapter 7 bankruptcy on my income taxes?” The answer is YES, but there are a number of requirements before doing so. This article will try to shed some light on what those requirements are.

The first concern is that the taxes in question be based on income taxes and not some other form of tax. Which means the debt in question must be from the federal or state IRS or taxes based on gross income. Second, the return on which taxes are due must be at least three years old. These expirations must be at least three years before you plan to file your chapter 7 bankruptcy petition. This must also include any extensions that have been filed, which would be added to the end of that three-year period. In addition, the return in question must have been filed at least two years earlier. It is also important to know that to avoid objections in bankruptcy court by the taxing authority, the return must be executed, mailed, and complete enough to be considered an actual return for these purposes. Another requirement is that the taxes have been settled at least 240 days ago. Which means that the tax authority in question must have assessed the debt against the person filing for bankruptcy at least 240 days before filing for bankruptcy, which means that it has been recorded as a debt in the authorities’ records prosecutors at least 240 days before filing. the bankruptcy petition. The final requirement for discharge of income taxes under bankruptcy is that there was no fraud or willful evasion of said taxes. Essentially, the return must not be fraudulent or frivolous and the requesting party cannot be guilty of willfully evading any law.

It is also important for the bankruptcy petitioner to realize that not all tax debts are dischargeable under chapter 7 bankruptcy, you cannot get rid of debts not related to income taxes. The following is a brief summary of the types of taxes that are not dischargeable under Chapter 7 bankruptcy. Tax liens that are also known as secured taxes and that are attached to property, such as your home, cannot be discharged in a chapter 7 bankruptcy. Essentially, you will not be responsible for paying the taxes, but if the taxing authority placed a lien on your property to secure the debt, this will not remove the lien. Your bankruptcy attorney could file a motion to avoid liens, but liens placed on the property, just like if you had a claim for a lien against your property, are not automatically removed through a bankruptcy proceeding. Another form of tax, which is not dischargeable, is recent property taxes. If you had property taxes assessed before you filed for bankruptcy, that tax is not dischargeable. Although this only applies to property taxes that were paid within one year of filing for bankruptcy. Another form of tax that is not dischargeable is taxes that a third party is required to collect or withhold. These are what are sometimes called “trust fund” taxes, such as FICA, Medicare, and income taxes that have been withheld from your employer. There are also several other forms of taxes that are not dischargeable, such as excise taxes, customs duties, non-punitive tax penalties, and taxes like that. Finally, refunds that were improper or non-dischargeable tax-related credits will not fall under the rules of chapter 7 bankruptcy.

In conclusion, you can discharge income tax debt in a chapter 7 bankruptcy proceeding if all requirements have been met. That is why it is always important that you seek the representation of an experienced bankruptcy attorney in your area to handle these matters.