Blog – What happens to taxes in Bankruptcy?
Most people don’t understand that in many cases taxes can be discharged, wiped out and not owed after Bankruptcy. There are very complicated rules as to whether taxes are discharged in a BK, though. But, every year, many of our clients wipe out their tax debt in Bankruptcy, much to their relief.
Boise Bankruptcy Attorney Martin Martelle
The rules about discharge of taxes are very strict and require a careful analysis to determine whether they get wiped out. We can generalize in this article, but each situation is different, so a Tax Attorney’s analysis is necessary to determine if the taxes are subject to discharge.
Basically, the rules are as follows:
Only 1040 Income Taxes are subject to discharge. That means that 941 employment taxes are not subject to discharge.
The taxes must be at least 3 years old, from the due date of the tax return. The taxpayer must have filed a return. It also must be at least 2 years since the taxpayer filed the return. If there was an audit, it must be 240 days since the audit was completed and the taxes assessed.
These are the simplified rules. They are dependent on many variables. If you have tax liability and other debt, Bankruptcy might be a great option to deal with all of a person’s debt, including taxes.
Are tax or credit problems keeping you up at night?
Get on the road to recovery today call Martelle Bratton and Associates.