Eliminating Tax Debt
Tax debts are not automatically dischargeable in Chapter 7 or Chapter 13. But certain tax debts can be discharged. In cases of federal income tax debt, you must satisfy all five of these requirements:
- The due date for filing a tax return must be at least three years ago.
- The tax return must have been filed at least two years ago.
- The tax assessment must be at least 240 days old.
- The tax return must not be fraudulent in any way.
- The taxpayer must not be guilty of tax evasion.
If all five of these conditions are met, income tax debt may be discharged.
Chapter 7 bankruptcy offers better opportunities for discharging tax debt than Chapter 13 — because Chapter 7 is a liquidation, while Chapter 13 is about stretching out payments.
Taxes That May Not Be Discharged
- Payroll taxes and penalties for fraud are never dischargeable.
- Tax penalties from tax debt that was ineligible for discharge may not be discharged. (But penalties on dischargeable tax debts may be discharged.)
- Tax obligations for years in which you failed to file tax returns may not be discharged.
- Trust fund taxes may not be discharged.
- Taxes withheld from an employee’s paycheck may not be discharged.
The laws governing eliminating tax debts are complex. If you have questions about a tax debt, stop by our Jackson Street offices in Alexandria and ask one of our lawyers what your options are. Or talk to our attorneys at 318-625-0471.
Call McBride Law Firm of Alexandria, Louisiana · 318-625-0471