Discharge of Tax Debt Through Bankruptcy

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On behalf of Silver Tax Group posted in Back Taxes on Friday, November 10, 2017.

Chapter 7 and Chapter 13 bankruptcy allow Michigan residents a number of options when it comes to discharge of debt. Obviously, many bankruptcy filers will also have concerns regarding discharge of tax debt.

There are some steps to take before such discharge can occur, however. For example, you will have to demonstrate that you filed your four prior returns with the IRS. This includes providing copies of your most recent income tax return to the bankruptcy court and to creditors who requests this information. And such filing must also take place before the first creditors’ meeting in your bankruptcy matter.

Other rules for discharging tax debt

There are five rules concerning discharge of tax debt including:

  • Any due date concerning filing of tax debt must be at least three years ago.
  • The actual filing of tax debt occurred within the last two years.
  • Any tax assessment must be 240 days or older. This means the assessment by the IRS occurred 240 days before your bankruptcy filing.
  • There are no issues concerning you being guilty of tax evasion.
  • The tax returns you submit to the bankruptcy court for their review are not fraudulent.

Based on your situation…

As everyone’s circumstances are unique, it is important not to come to conclusions about discharge of tax debt during bankruptcy without having all of the facts. For example, if there are issues concerning fraudulent returns, you may already be facing unwanted IRS scrutiny. Such allegations may result in fines, penalties, and even jail time.

For this reason, the advice and guidance of a seasoned tax attorney could be invaluable.

Managing Partner of Silver Tax Group, author of the book “Stop the IRS”. Practicing a variety of tax issues, regulations, laws and rights. Specializing exclusively on tax matters involving IRS audits, negotiation, settlements & compromises.

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