The IRS has five basic rules before they’ll let you discharge tax debts,and if you meet them, bankruptcy can make them go away:
- You can only wipe out income taxes — not penalties for fraud, taxes that you owe for employees, or others.
- Tax cheats need not apply– if you engaged in tax evasion or filled out a return that the IRS considers fraudulent, a bankruptcy won’t help.
- The three-year rule. Your tax debt has to be at least three years old before you can discharge it – this gives the IRS a chance to recognize and collect it.
- You filed a timely return – While the IRS gives you a little grace period, if you haven’t filed a return for the tax you owe at least two years before your bankruptcy, you’re out of luck.
- The 240-day rule – While the taxes have to be 3 years old, the IRS needs to have been aware that you owed the money for at least 240 days. Alternately, you can also get any taxes from over 3 years ago that they haven’t recognized reversed
If you think that you meet these requirements or if you’re not sure, contact us. Our tax specialists will discuss your situation with you and see if bankruptcy is the best option.
If you aren’t ready for it yet, we can even help you with pre-bankruptcy planning.
To learn more about how we can help you, complete the short form below for a consultation with one of our tax specialists.