01 Feb IRS Tax Debts may be discharged in Bankruptcy
IRS Tax Relief in Bankruptcy
As we all know, tax debts can spiral out of control and lead to an IRS tax lien, wage garnishment, or even property seizure. Most people mistakenly believe that taxes are never dischargeable in a bankruptcy. This myth is absolutely wrong! Although there are certain criteria that must be met, bankruptcy relief is often the best way to solve a serious tax problem and stop IRS collection activity. The filing of a bankruptcy case automatically and immediately stays (stops) IRS bank account levies and wage garnishments, and enables the taxpayer to either obtain a discharge or reorganize his or her tax liabilities.
Remember, the IRS is not just any creditor and has the ultimate power to do things other creditors can only dream of. However, if you hire a lawyer before the situation gets worse, there are options and possible solutions available.
Each type of bankruptcy treats IRS tax debt differently. The two most common forms of bankruptcies are Chapter 7 and Chapter 13.
Tax Debts in Chapter 7
Some tax debts are dischargeable through Chapter 7 bankruptcy. If taxes are more than three years old and you filed tax returns related to them more than two years ago, the likely outcome is that you will not have to pay them. Tax obligations that are not dischargeable under Chapter 7 include taxes less than three years old, business taxes, sales taxes, and payroll taxes. In Chapter 7, non-exempt assets are liquidated; any of the leftover IRS tax debts are then discharged unless specific IRS specifications are still not met. If these criteria are not met, the entire IRS tax debt needs to be repaid in whole after the whole bankruptcy process is done. Recent IRS tax debt, meaning not older than three years is not dischargeable.
Tax Debts in Chapter 13
If you are not qualified to file for a Chapter 7 or have decided that Chapter 13 is your best option, non-dischargeable tax debts can be included in your repayment plan. Chapter 13 is the most common of the important tax relief bankruptcy tactics, with some of the IRS tax debt being forgiven. Assets typically don’t need to end up being liquidated; with your income financing the whole payment plan.
In addition, bankruptcy’s automatic stay applies to the IRS as well, meaning all collection efforts pending against you will be stopped. Filing for Chapter 13 will also accomplish two other very important things: Penalties that the IRS has tacked on your tax debt will be discharged, AND, no new penalties or interest will accumulate while you are in Chapter 13. In short, you may pay considerably less money to the IRS by going through bankruptcy than you would if had tried to work out a debt settlement agreement with them on your own.
Note: This is not a legal advice. You should seek the advice of your attorney about your specific case.
Note: This is not a legal advice and presented for information purposes only. If you have immigration problems the Law Offices of Crispin C. Lozano can help you find a solution before your problem gets worse which could lead to deportation and family separation.
Bankruptcy Basics
- Bankruptcy will actually improve your credit within one year because your unsecured debts are discharged. Although the bankruptcy will be in your records for 10 years, not filing bankruptcy will make your credit even worse until most your debts are paid.
- If you are being sued by your creditors, most money judgment can be eliminated in bankruptcy.
- Collection actions continue and you can be sued if you are in debt settlement.
- Chapter 7 will eliminate all unsecured debts. If you are near retirement age, you must eliminate most of your debts.
Our Law Firm entered into agreement with nursing and care home facilities in the U.S. to process applicants for Caregivers in the US. We also process petition for caregivers from the Philippines.
2. BIG TAX REFUNDS FOR SELF-EMPLOYED
The Coronavirus Cares Act Sick and Family Leave for Self-Employed provides big tax refunds for self-employed individuals for tax years 2020 and 2021. If you have filed your tax return and failed to avail of this refund contact us for consultation. The refund ranges from $4000 to $32000 per individual self employed depending on your income.
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Chris Caday Lozano, Esq. is an active member of the State Bar of California, the American Immigration Lawyers Association and San Francisco Trial Lawyers. He practices immigration law, bankruptcy, personal injury and income tax representation since June 1999. His contact phone is 1-877-456-9266, email: info@CCLlaw.net Website: www.crispinlozanolaw.com/ with officers in Hayward and Cerritos, CA.