When you owe the IRS, it may feel like there is no real settlement solution. As you contemplate your options you could be overlooking another option, having your tax debt discharged with an IRS bankruptcy. It's true, in some cases, you can reduce your tax debt to zero with an IRS bankruptcy, but it isn't easy.
The most important benefit to trying to settle your taxes with an IRS bankruptcy is that during the process there is a stay of IRS collections. That can certainly help taxpayers going through an IRS garnishment or a bank levy, as to free up funds for legal representation or to make ends meet.
Tax debt is treated the same for both Chapters 7 and 13. IRS bankruptcy is usually not a viable option to depend on to settle your taxes owed, but in certain circumstances, you can include your tax debt for an IRS bankruptcy. On this page we will breakdown the separate chapters and how they apply to an IRS bankruptcy.
IRS Bankruptcy: Chapter 7
A Chapter 7 bankruptcy is a liquidation of assets to pay creditors owed, and usually ends in the dissolution of all debts. In order to attempt to get your taxes discharged through an IRS bankruptcy, all federal, state, and local tax returns will need to filed, even if you are missing tax years. You risk having your IRS bankruptcy denied if you aren't compliant with your tax filings.
In order to apply your tax debt, the tax returns of which the debt is applied must be at least 3 years old, but liabilities like payroll taxes are not dischargeable through an IRS bankruptcy. Any penalties and interest on the discharged tax debt will also be wiped away, essentially leaving you with a zero tax liability.
Always speak with a tax attorney before you attempt to file for Chapter 7 bankruptcy.
IRS Bankruptcy: Chapter 13
A Chapter 13 bankruptcy is a reorganization of personal debts. The debtor is required to comply with a payment arrangement over the course of 3 - 5 years. To get your taxes included in the IRS bankruptcy, the returns should be older than 3 years, as with Chapter 7. Also, interest and penalties stop accruing when it is in the IRS bankruptcy of Chapter 13.
The single best benefit of including your back taxes within Chapter 13 are the tax liens are frozen, meaning any future acquired assets are beyond the reach of the existing lien.
You should work with a reliable tax professional to be sure you qualify for an IRS Bankruptcy to reduce or remove your back tax debt.
Call (800) 590-4524 now or fill out the form below for a free consultation about IRS bankruptcy. We'll only connect you with a tax debt relief company holding at least a B rating with the Better Business Bureau.
