When searching for an alternative solution to your IRS tax problem, one potential avenue that you may be advised to consider is filing for bankruptcy. Some eligible taxpayers may be able to utilize the bankruptcy proceedings in order to resolve their tax debt or liability. Whether or not you may qualify depends on several factors, including the kind of tax debt that is involved and the value of your current assets.
Five Considerations for Bankruptcy and Tax Debt
Before proceeding with bankruptcy as an attempt to resolve your tax problem, it is important to consider the following:
- How old is your tax debt? In order for bankruptcy to be a possible solution to your tax problem, your debt must be at least three years old.
- How long ago did you file the tax return relating to the debt that you are attempting to discharge in bankruptcy? IRS rules require that the returns have been filed no less than two years prior to your bankruptcy filing.
- When did the IRS assess your tax debt? In order for the debt to potentially be discharged through bankruptcy, it must have been assessed by the IRS at least 240 days before the bankruptcy filing.
- Was your tax return fraudulent in any way, shape, or form? If so, the tax debt that you are attempting to get rid of cannot be discharged as part of your bankruptcy. This is true even if you later amended the return to address the fraudulent information.
- What is your motivation for attempting to discharge your tax debt as part of your bankruptcy filing? If your overall goal is an attempt to simply evade paying taxes, you cannot utilize the bankruptcy system in order to avoid the tax obligation.
Finding a solution to your IRS tax problem can seem like a daunting task for those who are unfamiliar with the complex labyrinth of our tax system. We encourage you to begin moving forward by checking out our free guide, The Ultimate Survival Guide for IRS Problems.