Tax season is around the corner, and questions abound. Some are wondering whether they need a tax preparer, and many are unsure of whether they’ll owe more or less than last year. If you’re worried about what will happen if you owe the IRS more than you can pay, you aren’t alone.
When clients come to us for support through their bankruptcy proceedings, many of them ask if bankruptcy can discharge their tax debts. Tax debts, along with student loans and alimony, are among the types of debt largely seen as untouchable. And while this may be the case for certain individuals, many people lose the opportunity to obtain complete financial freedom because they don’t know their options.
When it comes to tax debt, bankruptcy may be underestimated. The IRS is much more intimidating than the average creditor or collection agency, and not paying what you owe can result in severe consequences—from ruined credit to a prison sentence. Because of these risks, debtors who cannot afford to pay back-taxes don’t even consider how bankruptcy might be able to help them.
But according to the IRS, bankruptcy might be an option for small business owners and the self-employed. Other alternatives include payment plans and offers in compromise.
Discharging tax debt may be possible, so long as:
- You did not commit intentional tax evasion
- You did not commit tax fraud
- Your tax debt is not comprised of penalties for the above crimes
- Your tax debt is at least 3 years old (beginning from the date they were due or when they were filed, whichever is later)
- You filed tax returns for the taxes you owe
Filing tax returns is crucial if you are attempting to discharge tax debts or if you are discharging any type of debt through bankruptcy. According to the IRS, if you are filing for Chapter 13 bankruptcy, you must file the last four years of tax returns.
Ultimately, discharging tax debt through bankruptcy is possible—but it is neither easy nor simple. If you are wondering whether you could qualify for this relief, you’ll need the knowledge and experience of a highly trained legal professional.
Contact Our Firm to Assess Your Options
At Ronke Law, our lead attorney is personally committed to helping his clients and their loved ones through the most challenging periods of their lives. With degrees in accounting, business administration, and finance, he believes in the lasting power of proper planning, and he works every day to use his skills for the betterment of his clients’ futures. If you are struggling to pay your debt, unsure of how tax laws affect your present and future, or hoping to preserve your financial security and begin your legacy’s exponential growth, we are fully prepared to provide the counsel and representation you need.
Get started today with a complimentary case review or give us a call at (605) 250-9988 today.