It is a common misconception that IRS tax obligations can never be discharged in a bankruptcy. It is true that if there is tax fraud involved, a tax return was not filed, or the tax was not listed as a liability in the bankruptcy filing, then the tax cannot be discharged in bankruptcy. However, if there was no tax fraud involved and the tax return was filed then there is a point in time when IRS tax can be discharged in bankruptcy and when the IRS can no longer commence tax collection proceedings. When you are going through a bankruptcy your bankruptcy lawyer should advise you that the IRS must cease collection action after a bankruptcy! However, you must notify the IRS in writing.
The Cartersville Law Firm of Wade H. Everett fully informs its clients on all of the legal and financial ramifications of their bankruptcy case – especially all of the tax issues (Federal and Georgia) involved. IRS issues are an important example as to why it is vital that you discuss all bankruptcy issues with a trusted and highly competent bankruptcy lawyer before you file for bankruptcy. If not properly orchestrated, even with bankruptcy protection, you could still be left with substantial debt that could have been cleared.
Bankruptcy and IRS Tax Matters?
Taxes are debts to a government agency much like debts you might have to individuals and companies. They are different from other debts, however, because the governmental agencies collecting these taxes have greater power over you and your property than other creditors have.
Since the bankruptcy code provides for protection to anyone filing bankruptcy, these taxing authorities may have less ability to affect you and your property while you are under bankruptcy protection. The filing of a bankruptcy case may stop collection activity of governmental agencies for the collection of taxes owed. A Chapter 13 bankruptcy can provide for level monthly payment of your tax obligation without additional interest or penalties. Chapter 7 and Chapter 13 can reduce or eliminate certain tax obligations that have been due and payable for more than three years.
Bankruptcy may be the best, or only, solution for extreme financial hardship. However, it should be utilized exclusively as a last resort since it has long-lasting consequences. The record of a bankruptcy remains in your credit files in credit bureaus for as long as ten years. It is recommended to consult a financial expert as well as a qualified bankruptcy attorney before resorting to bankruptcy as a means of solving your economic troubles.
This information is not intended to cover bankruptcy law in general, or to provide detailed discussions of the tax rules for the more complex corporate bankruptcy reorganizations or other highly technical transactions. For additional tax information on bankruptcy, refer to Publication 908, Bankruptcy Tax Guide and