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You may be able to discharge tax debts under Chapter 7 Bankruptcy, but by no means is that a certainty. Following recent modifications to Bankruptcy law, tax debts are actually treated the same in both Chapter 7 and Chapter 13 Bankruptcy filings, but not all tax debts meet the criteria.
As you know, income tax returns are filed on a yearly basis. Any tax debts you may owe will naturally be associated with the specific year of their filing. For a tax debt to be eligible for discharge, the due date for filing the return resulting in the debt must be at least 3 years prior to the Bankruptcy filing. In addition, the return must have been filed no less than 2 years ago, and the return must not be frivolous or fraudulent in any way.
Further, the IRS must assess the tax no less than 240 days prior to the Bankruptcy filing. Also note that tax debts assessed by the IRS for unfiled returns are not eligible for discharge.
Taxes are tough enough by themselves. Add in the complexities of a bankruptcy and you’re sure to need accurate and useful information in order to make the right decisions as you move forward. Please call to set up a consultation with our friendly, knowledgeable staff. We’ve helped a great many people, and we can help you, too.
We are your full service CPA firm specializing in business taxes and accounting services